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Posted on 1/15/2019 6:30:00 PM

Key Takeaways
- Invest in multiple stocks through one portfolio
- Regular monitoring by experts
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It is a universally accepted fact that equities deliver better returns than other asset classes. The reason is simple – they carry a higher risk. And, according to the Risk-Reward ratio – higher risk = higher potential returns. Buying a share entitles the investor to the profits booked by the company but also the losses. A shareholder is like a partner of a company without having to manage its operations. However, buying equities directly requires the investor to choose the right companies so that he can earn good returns. A wrong choice can lead to potential losses.

This is where an Equity Mutual Fund Scheme steps in. Here are the features:

  1. Multiple stocks in a portfolio: Every such fund invests in a collection of stocks which is either
    a. sector-specific or
    b. region-specific or
    c. market capitalization-specific
    …as defined in the investment objective of the scheme.
  2. Benefit of owning multiple stocks: Since the funds are invested in multiple stocks, even if a few of them underperform the portfolio manages to absorb the losses without burning a hole in the investors’ pockets.
  3. Corrective action by the team of experts: Even if some stocks are underperforming, the team of experts working with the Mutual Fund house ensure that the portfolio is rebalanced to meet the benchmarks defined at launch of the scheme.

Hence, in many ways, Equity Mutual Funds are an efficient way of purchasing stocks and creating wealth over the long term.

Regardless of the asset class invested in, a good investment portfolio is one that is diversified, is regularly monitored and rebalanced to stick to the financial goals. An Equity Mutual Fund does precisely that and helps you earn good potential returns without having to personally choose, monitor and manage your investment in individual stocks.

Tags: Mutual Funds Investments Equity schemes Equity Market

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