Equity Mutual Fund: Know these important things before investing [2025]

 🧠 Equity Mutual Fund: Know these important things before investing [2025]

If you are planning to invest in the stock market but do not understand where to start, then equity mutual funds can be an easy and sensible option for you.

✔️ What is an equity mutual fund?

Equity mutual funds are funds in which a large part of the amount raised from investors – at least 60% – is invested in the shares of companies. These funds depend on the movement of the stock market and have the potential to give better returns in the long term.

For example, if you invest ₹ 1,000 every month in an equity fund, then that money is not invested in the shares of a single company, but divided into many companies – which reduces the risk a bit.

🔍 How do these funds work?

When you invest in an equity fund, your money is invested in the shares of different companies in the stock market through a fund manager. In this way, you invest in the stock market with the help of professionals, without monitoring the shares on a daily basis.

🧩 Types of equity funds

1. Based on market cap

Large cap funds – Investment in large and stable companies

Mid cap funds – Medium-sized companies, slightly higher returns and risk

Small cap funds – Emerging companies, higher risk and returns

Multi cap funds – Balance of all categories

2. Tax saving options

ELSS (Equity Linked Saving Scheme) – Double benefit of saving tax and investing

3. According to investment strategy

Thematic, focused, or index based funds

🪙 How to invest?

You can invest a small amount every month through SIP (Systematic Investment Plan). This reduces the impact of market fluctuations and also creates a habit of investing.

If you want to invest a large amount at once, it is called Lump Sum Investment. This option is better when the market is down.

📱 Easy ways to invest

Nowadays, with apps like Groww, Zerodha, Paytm Money, you can start investing in mutual funds in 5 minutes. Just complete KYC and set up SIP.

📈 Benefits

Investment in the stock market without technical knowledge

Inflation-beating returns in the long term

Tax savings through ELSS

Portfolio diversification

⚠️ Risks

Direct impact of market fluctuations

Choosing the wrong fund can lead to low returns or loss

Investing in the short term can be risky

🧾 How is tax levied?

Investment for less than 1 year: 15% short term capital gain tax

Investment for more than 1 year: Tax free up to ₹1 lakh, 10% tax above that

❓ Frequently Asked Questions (FAQs)

Q. When should one choose equity mutual funds?

When you want to invest for 3-5 years or more and can tolerate the volatility of the stock market.

Q. Is it better to invest through SIP?

Yes, investing through SIP balances both time and risk.

Q. Is investing through Groww or Zerodha safe?

Yes, both of these are registered and regulated platforms by SEBI.

🔚 Conclusion

If you are serious about your financial future and want to get good returns, investing in equity mutual funds can be a wise move. However, it involves risk, so do some research before investing and consult a financial advisor.