Long Term or Short Term Equity Funds?

There’s one parameter that investors need to take care of and that is the time horizon of investment. When people think of investing, they should always have a long term approach for it since long term investment period offers several benefits over short term investment period.

Long term investment period complements equity mutual funds whereas short term investment period might prove to be quite risky in equity investing.

Equity funds invest majorly in stocks of companies. Stock holdings represent the proportionate holdings of a company’s business and its profits and losses. Hence, growth in stock valuation entirely depends on the individual company.

This makes equity funds highly reactive to the market volatility. Any change in the market can change the business process of a company.

It is obvious that companies with strong fundamentals and proficient years of experience shall develop in the coming years. Hence, for this long term equity investment is highly preferable.

Benefits of Long Term Equity Funds

Drawbacks of Short Term Equity Funds

Investing in equity funds for short can be risky because of the volatile nature of equity mutual funds. If markets are hit by some misfortune events then it may crash resulting in a crash of valuations of funds and stocks.

Moreover, the power of compounding will not be applicable since compound interest is a long term strategy and one gains substantial interest the longer the investor is invested. Not to forget the tax loophole of 15% as per the STCG.

More About Long Term Equity Funds

Lump sum and SIP investment mode both have their benefits that can help investors to gain superior returns.

One can invest in lump sum mode when markets fall and buy more quality funds at lower valuation thus acquiring more units.

SIP mode benefit includes the ease of investment by investing at regular predefined intervals unlike lump sum. However, SIP fails to consider the market valuation and invests at a predefined date.

To club both these benefits, RankMF introduced SmartSIP that is an advanced order type to SIP and invests smartly depending on the market volatility. Here’s what SmartSIP does:

• Invests regularly when markets are fairly valued
• Invests double when markets are undervalued
• Skips investing & partially sells to profit when markets are overvalued

Because of this smart way of investment, SmartSIP is highly preferable for investors.

Get detailed information on how SmartSIP works and how it is an advanced investment option to SIP and lump sum.