- 1 What is the meaning of an equity fund?
- 2 Operation in which equity funds work
- 3 Who should put money into equity funds?
- 4 Characteristics of Equity Funds
- 5 Based on Market Capitalisation
- 6 Indian equity fund performance
- 7 Benefits of Putting Money Into Equity Funds
- 8 Birla SL Frontline Equity
- 9 Conclusion
Equity investing has been growing in popularity recently. Compared to other investment types, equities instruments have the highest potential returns.
What is the meaning of an equity fund?
Equity mutual funds invest in the stocks of businesses with a range of market capitalizations to produce significant returns. The company’s performance significantly influences returns to investors. Equity mutual funds have the potential to offer higher returns than debt and hybrid funds because they are the riskiest category of mutual funds.
Operation in which equity funds work
At least 60% of the assets in equity mutual funds are allocated in equity shares of various corporations in balanced amounts. The asset allocation will match the goal of the investment. Depending on the state of the market, the asset allocation may consist only of stocks of large-, mid-, or small-cap companies. The investing approach could be growth- or value-oriented.
The fund management decides whether to purchase or sell to benefit from shifting market movements and maximize profits. The balance may be invested in debt and money market instruments after allocating a sizeable part to the equities section. It will handle any unforeseen redemption requests and reduce risk to a certain extent.
Who should put money into equity funds?
Your choice to invest in equity funds must be consistent with your risk tolerance, time horizon, and goals. Generally speaking, it is best to invest in equities funds if you have a long-term aim. Additionally, it will offer the fund the necessary time to manage market swings.
Large-cap equity funds can be the best option if you’re an ambitious investor who wants to be exposed to the stock market. These funds make equity investments in high-performing, low-risk businesses. The long-standing businesses have historically provided consistent returns.
You might consider investing in diversified equities funds if you are knowledgeable about the market and prepared to accept reasonable risks. These buy stock in businesses with all market capitalizations. Compared to equity funds that solely invest in small- and mid-cap companies, these funds offer a great balance of high returns and reduced risk.
Characteristics of Equity Funds
Investment costs: The expense ratio of equities funds are frequently impacted by the frequent buying and selling of stock shares. The maximum expense ratio for equities funds has been set at 2.5% by the Securities and Exchange Board of India (SEBI). Investor returns will increase if the expense ratio is lower.
Holding Period: When investors redeem their fund units, they realize capital gains. Investors must pay taxes on their capital gains. The holding period, which is the length of time an investment Plan is held, determines the tax rate. Short-term equity assets are those held for less than a year, and short-term capital gains are subject to a 15% tax. Long-term equity holdings have been held for more than a year, and if the gains reach Rs 1 lakh per year, they are subject to a 10% tax.
Cost-effectiveness and diversification: By investing in equity funds, you gain exposure to several stocks for a little money. Your portfolio, however, runs the risk of becoming too concentrated.
Equity Fund Types
Equity funds can be categorized based on the type of companies and industries they invest in and their investing mandate.
Based on the themes and sectors
This category includes equity funds concentrating their assets on a specific industry or subject. A particular industry, such as FMCG, pharmaceuticals, or technology, is the focus of sector funds. Thematic funds focus on a single topic, like international stocks or emerging consumer companies. Sector and thematic funds tend to be riskier because they concentrate on a specific industry or theme. It is because their performance is subject to both market and sectoral risks.
Based on Market Capitalisation
- Large-cap equity funds: Because large-cap businesses are well-established, large-cap funds can provide steady returns.
- Mid-cap equity funds: These funds finance the acquisition of mid-sized businesses. Large-cap funds tend to be more stable than mid-cap funds.
- Mid-and-small-cap funds: These funds, which have the potential to provide substantial returns, invest in both mid-cap and small-cap funds.
- Shares in small-cap funds: These are purchased by these funds. Investors need to know that small-cap funds are more vulnerable to risk and market volatility.
- Multi-cap funds: These funds buy stocks in all market capitalization ranges. Depending on the state of the market, the fund manager chooses to invest primarily in a particular capitalization.
Indian equity fund performance
Equity funds typically offer the highest returns of any type of mutual fund. Equity funds have typically produced returns between 10% and 12%. The returns vary based on market activity and general economic conditions. You must carefully select your equity funds to receive returns that meet your objectives. To do that, you must study the stock markets closely and be knowledgeable about quantitative and qualitative elements.
Benefits of Putting Money Into Equity Funds
There are numerous advantages to investing in mutual funds:
- Shrewd financial management
- Low Price
- Investing in systems
Equity fund investing has the main advantage of relieving you of selecting the stocks and industry sectors in which to invest. Equity investment takes much research and understanding to be successful. Before investing, you must comprehend and evaluate a company’s performance. You should also be aware of future projections for the performance of a specific industry. Of course, doing this takes a lot of time and work, which most people lack. Therefore, the best action is to invest in an equity mutual fund and let a professional fund manager choose the stocks.
Birla SL Frontline Equity
Birla SL Frontline Equity Fund is a large-cap mutual fund scheme. Birla SL Frontline Equity is a non-convertible investment option in a mutual fund. This product has been introduced by Birla Sun Life Securities Limited (BSL) to cater to the needs of its investors who wish to invest in equities but do not want to get into debt by taking physical delivery on their investments. The funds are managed by BSL Asset Management Company Limited, which manages other products issued by this company, like Fixed Maturity Plans (FMPs), Stocks & Shares Funds, etc.
Its objective is to generate long-term capital growth from a portfolio primarily of equity and equity-related securities of companies that have the potential to outperform the market.
The fund aims to provide investors with high risk-adjusted returns by investing in large-cap stocks, including Nifty 50 stocks, mid-cap stocks, and small-cap stocks.
Birla SL Frontline Equity invests mainly in Nifty 50 stocks. The fund’s investment portfolio consists largely of stocks that make up the Nifty 50, which include names like Infosys Technologies, Wipro, and Sun Pharmaceutical Industries.
This fund has garnered a good reputation for its performance and has grown consistently since its inception. It has been able to deliver returns exceeding 15% per year during 2008-2018 against 9% for an SBI Fixed Term Plan by HDFC Ltd., which is one of its closest competitors.
Birla SL Frontline Equity- Feature, Advantages, Claims, Premium Maturity, Tax Benefits, Emi Options Available, Deaths Cases, and Full Payment Advantage are given below:
The features are as follows:
- The investment amount is not fixed. You can invest according to your risk appetite.
- It is a product suitable for long-term horizon investments with an option of reinvesting into another scheme within the same group or investing in another group altogether (if any).
- There is no cap on investments which means you can invest as much money as you want in this scheme.
Birla SL Frontline Equity is a cost-effective product with no loading, long-term lock-in period, or surrenders charge. It also has no exit load, and the premium is paid as a lump sum, so the investor does not have to worry about paying regular premiums. In addition to these benefits, it offers additional family members adding advantages, and their details are given below:
If you have a claim for death or permanent disability, your policy will pay the amount of your claim as per the terms and conditions.
The maximum amount payable is $50,000 (Rs 5 lakhs). This amount may be increased by an annualized bonus rate which is added to the premium maturity of your policy, depending on how old you are at the withdrawal date.
Claims can also be made if there are additional family members in case of death or permanent disability.
Premium Maturity is a feature of Birla SL Frontline Equity where the policyholder gets the sum assured on maturity. The amount of premium maturity depends upon your age when you buy this product and the term in which you need to pay it back.
This option can be availed only under the Optional Sum Assured Benefit Plan (OSABP).
The tax benefits on maturity, death maturity, and death are as follows:
- Tax Benefits on Maturities: If you have invested in your scheme up to the end of March 2021, you will be eligible for tax deduction at source (TDS) up to a maximum of Rs 1 lakh per year. This deduction can be claimed irrespective of any other benefit available under Section 80C or other provisions of the Income-tax Act 1961.
- Tax Benefits on Death: If you die before the maturity of your investment, then your beneficiaries may get a 50% refund from the government’s PTCLPFY Scheme 2017 at par rates in case they invest in this scheme through any bank account opened by them earlier between April 30th, 2017 May 31st, 2017. Otherwise, it will be treated as an income from other sources, which attracts taxes at 10%.
EMI Options Available
The EMI option is available to you if you purchase the shares at a higher price than the prevailing market value of your shares. You may pay up to 90% of the total amount as an installment and the rest 10% in a single payment on or before the maturity date or five years from the issue date, whichever is earlier.
You can avail of this facility by paying the required amount upfront through cash or cheque/draft. Alternatively, it can be made through any mode like a credit card, debit card, etc., provided that we have a sufficient credit facility for such payments. However, there is no guarantee that we will accept any other mode than cash/cheque/draft since it might not be convenient for us due to various reasons like lack of funds in our bank accounts, etc.
The policy will be paid in full if the assured dies within the policy term.
The insurance company shall pay all sums due to or on behalf of any person because of his death, which may be due to any cause other than accidental bodily injury or disease. Under this policy, whether such death occurs before or after the expiry and whether or not such a person was insured under this policy at the time when he died.
Full Payment Advantage, Deaths Cases Additional Family Members adding advantage and their details
Family members can also be added to the policy. Family members can be added at any time in the policy term. Family members can be added in multiples of 5 up until you reach the maximum number of family members allowed under your insurance plan. If you have more than one spouse and children, you must choose between them individually or as a family unit (i.e., spouse + children).
Family members are not required to live with each other at all times. However, suppose they do not live together. In that case, we ask that they remain insured under our plans for as long as possible before moving on elsewhere for employment purposes or other reasons outside Birla SL Frontline Equity’s control, such as divorce/separation.
Birla SL Frontline Equity Add on’s
Birla SL Frontline Equity Add-ons are a collection of equity and debt instruments issued by Birla SL. The fund keeps its portfolio updated with individual companies’ latest rulings and filings, which helps you better understand your investment’s fundamentals.
Birla SL Frontline Equity Add on’s available at different levels of risk:
- The Birla SL Frontline equity add-on is less risky than the Birla SL Frontline Equity Fund because it invests in a diversified portfolio of stocks chosen for their strong fundamentals and low valuations. This approach reduces your risk and helps you get more returns on your money over time.
- The Birla SL Frontline Fund is riskier than the Birla SL Frontline Equity Add-on because it invests in only a few stocks, which can increase your exposure to market turbulence if these companies face difficulties due to macroeconomic factors, inflation, or interest rates.
- Relative Strength: This measures how well an investment compares to its peers. The higher your fund’s relative strength, the more likely you are to outperform its peers.
- Compound Annual Growth Rate (CAGR): CAGR is an indicator that shows how much money would be earned if investments were reinvested at compound interest over time. It’s calculated by multiplying the initial investment amount and multiplying it by two times per year, making it easy to see how quickly your money will grow or drop over time.
- Annualized Return: This tells us how much return was earned each year on average. It’s important because it can tell us whether we should expect more gains or losses in future years and help determine whether our investments have been successful so far! The higher this number is compared with other funds available today, the more there’s likely something wrong somewhere within them. Either way, these numbers aren’t always accurate due to possibly being manipulated somehow.
We have covered the Birla SL Frontline Equity Add on’s in this blog post. As the world is evolving, there are various concepts getting recognition and popularity day by day. Equity fund investments are one of them. Don’t waste your money on frauds, grow with equity fund investments!!