Our lives are hugely connected with the word investment. We invest time, skills or even relationship goals for a justified return in every phase. However still, the idea of investing funds leads to raising our eyebrows. It is because of our lack of awareness about it. We only think of the associated risk when it comes to investments. However “if you risk nothing, then you risk everything”. Sometimes you should take some risk in life. We do not pay attention to small things before buying the fund and then it results in a great loss, which we have to face for long term.

Equity mutual fund is a mutual fund, which primarily invests in stocks. They are also known as stock funds. Share market is volatile which goes up and down. In Equity mutual fund, you cannot redeem your money before 1 year. If you want to redeem den you will be charged 15% tax on total amount.

However, before buying an equity mutual fund you need to take some things into consideration-

First, you need to find out what all are the categories. There are many categories which also have various benefits but we are not aware of that. We miss out some things. Make sure that you are aware of all these categories.

There are several kinds of Equity Mutual Fund:

  • Large-Cap Funds: Lesser returns, risks
  • Diversified Funds: More diversified and less risk
  • Thematic Funds: Wide sectors
  • Mid-Cap Funds: High returns, risks
  • ELSS Fund: Short tenure with more Tax, Maturity benefits
  • Index Fund: Less investment, high risks
  • Flexi-cap Funds: More diversified and less market independent

You must always remember to check the following before you choose equity mutual fund or any particular type of equity mutual fundinvestment:

  • Is the return higher?
  • Is tax payment hassle free?
  • Is anytime withdrawal possible?
  • Does it have lowest risk?

You also need to ensure that equity mutual fund offers all these prime features-

  • Safe and Expert Monitoring
  • Wide range with hybrid models like Infrastructure/Fixed maturity/Exchange traded/Debt mutual funds etc.
  • Low expense with higher Returns
  • Multiplication of transparent schemes
  • Convenient Cash Flow with Anti-inflation management
  • Multiple Investment Options with installments/withdrawal
  • Systematic regular investment
  • Tax benefits
  • Portfolio diversification
  • What are its charges? Do they charge extra?

You should also need to see the performance of the scheme vs. its category.

Expense ratio- This is the most important factor. The fund returns will directly influence if the expense ratio is high. Another factor, which easily is neglected, is capture ratio. Consider them before you take the plunge.

Thus, before buying an equity mutual fund you need to see all these things. You need to rectify whether it caters all your needs. You should also ensure that your investment does not go waste. Also, see that if you can invest indirectly or you have to invest through mutual funds only.