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Equity Funds
What does an equity fund mean ?
Equity mutual funds invest in the stocks of businesses of all market capitalizations in an effort to produce large returns. Equity mutual funds have the potential to offer larger returns than debt and hybrid funds since they are the riskiest category of mutual funds. Returns to investors are significantly influenced by the company’s success.
Equity fund's characteristics
1. Investment Cost
The expense ratio of equities funds is frequently impacted by the frequent buying and selling of stock shares. The maximum expense ratio for equities funds has been set at 2.5% by the Securities and Exchange Board of India (SEBI). Investor returns will increase if the expense ratio is lower.
2. Holding period
When investors redeem their fund units, they earn capital gains. Investors must pay taxes on their capital gains. The holding period, which is the length of time an investment is held, determines the tax rate.
Short-term equity assets are those held for less than a year, and short-term capital gains are subject to a 15% tax. Long-term equity holdings are those that have been held for more than a year, and if the profits surpass Rs 1 lakh per year, they are subject to a 10% tax.
3. Cost-effectiveness and diversity.
You may gain exposure to many stocks by investing in equity funds, and you can do so for a little sum. Your portfolio, however, runs the danger of being too concentrated.
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