Equity Mutual Funds vs Other Investment Options

Equity mutual funds are superior to other investment options, this is what many investors must have heard. But it is important for every investor to know the difference of Equity Mutual Funds vs Other Investment Options.

Equity-vs-other-mutual-funds

Investors must have a clear idea about investment since half knowledge can prove to be very dangerous in investing and one will never be able to make quality returns on their investment.

Here is a list of equity funds vs other investment options to help you get a distinct idea about how much equity funds can be good for your investment goals as compared to other investment options.

1) Equity funds vs debt funds

Investments majorly done in stocks of companies Investments majorly done in bonds, government securities, certificate of deposits, treasury bills, etc
Investments made for generating high returns Investments made to safeguard the invested amount
Risk is moderately high to high Risk is low to moderate
Investment held for more than 12 months are liable for LTCG tax Investment held for more than 36 months are liable for LTCG tax
Suitable for achieving your financial goals Best alternative for fixed deposits and savings account
You can save tax of up to 46,800/- by investing in ELSS funds - a type of equity fund There is no option to save tax
Investment held for less than 12 months are liable for STCG tax Investment held for less than 36 months are liable for STCG tax

2) Equity funds vs stocks

Less risk exposure as compared to stocks due to diversification High risk exposure
Tax benefit as per the Section 80C of the IT Act No tax benefit
Discipline way of investment with SIP Investment in one-go only
High cost due to management provided by fund managers Low cost as compared to equity funds

3) Equity funds vs index funds

High return potential Mirrors the market index performance
May be actively managed funds Passively managed funds
High risk Low risk as compared to equity funds
High management cost No or minimum management cost
Offers tax benefit under the Section 80C of the IT Act No tax benefit
Fund managers are actively involved Fund managers may not be actively involved as compared to equity Funds

4) Equity funds vs real estate

High liquidity Less liquidity
Pocket friendly investing (investors can invest starting from ₹ 500/-) Significant amount is required
Tax benefit including the Section 80C of the IT Act No tax benefit
Less risk as compared to real estate High risk
Less paperwork required A lot of paperwork required
Benefit of power of compounding No benefit of compounding

5) Equity funds vs gold

No fear of theft Fear of theft
High returns potential Comparatively lower returns than equity funds
Low liquidity High liquidity
Cannot be used as a commodity Can be used as a commodity
Less paperwork required No paperwork required
Extensive research required No research required

6) Equity funds vs fixed deposits

High returns potential Low returns
No lock in period (except for ELSS funds) Lock-in period of 5 years
High risk No risk
High liquidity Low liquidity
LTCG and STCG tax involved Tax levied as per the income tax slab
Tax benefit as per the Section 80C of the IT Act No tax benefit

These are the differences between equity funds vs other investment options. Investors should consider these points before investing. Invest in equity funds by allocating a certain portion of your funds to optimally create wealth.

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FAQs

Q
How are equity funds superior to other investment options?
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A
When returns are considered, equity funds are superior as it has high returns potential than most of the other investment options.
Q
What is the difference between equity funds and debt funds?
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A
Equity funds majorly invest in shares of companies whereas debt funds invest in bonds, treasury bills, certificate of deposits, etc
Q
Does equity investing require a lot of money like real estate?
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A
Equity funds are very pocket friendly that makes it possible for investors to invest small amounts starting from ₹ 500/- unlike real estate.