How to Participate in the Stock Market Without Having to Constantly Monitor It

Did you know that only 2% Indians invest in the stock market, which represents between 20 to 25 million people out of a population of 1.2 billion? Yet, this market is worth $1.4 trillion, as of 2016. If you do wish to benefit from stocks but don’t have either the experience or the time to study the market and make informed decisions, consider equity mutual funds. They offer you all the advantages of investing in stocks but at lower risk.

Before entering the stock market, you will need to select the right stocks and learn the basics of stock trading. This is not something everyone can be good at. Instead, if you choose to invest in equity funds, you gain all the advantages of stock trading, such as:

1. Portfolio Diversification

Your investment in equity mutual funds are spread across different sectors, which reduces the risk of major losses in future. In case the stocks of one sector decline, the loss will be compensated by stocks in other sectors, which would perform better. Therefore, these funds ensure a well-diversified portfolio to reduce the overall market risk.

2. Great Liquidity

This means that you can redeem your investments at any time you wish to. You might even be able to do this at a higher net asset value than the value at the time of your purchase. Simply stop your SIP and redeem all the units you want. The entire process will take seven days but in case your SIP is already mature, you can get your finances within three days.

3. Goal Oriented

Equity funds are the best when you have long term goals to achieve. The funds are broken down into large cap, mid cap and small cap investments and the returns vary accordingly. Higher the risk you take, higher the returns you receive from your investment.

4. Tax Benefits

When the investment period funds is more than a year, the returns become free of tax. But if you redeem before completing a year, a short-term capital gains tax of 15% is applicable. Therefore, it is best to invest for a longer timeframe. This also allows you to get the benefits of compounded returns.

5. Expert Management

Equity funds are managed by skilled professionals and you as an investor do not have to monitor the markets constantly. All the schemes are looked after by these professionals and they make investment decisions to ensure that you get the best returns on investment. No matter how much you study the markets, you might not be able to invest quite like these experienced fund managers.

The best part is that while investing in individual stocks tends to be risky, equity mutual funds lower the risk by diversifying the investment across sectors. So, go ahead and be part of the stock market without having to constantly worry about its performance.