Equity Mutual Funds invest your money in shares of companies of various sizes. When the share price rises, so does the value of the equity mutual funds invested in them.
When you invest in equity mutual funds , you are actually investing in the growth of our country and economy.
How so, you might wonder ?
Just look at life around you today and how it was 25 – 30 years ago. People have better jobs and are earning more. With the increased income they are spending money on cars, homes, clothes, eating out, travelling by planes, etc etc.
Who provides these services and earns the money ?
The above products and services are provided by a host of publicly listed companies on the stock markets. As the companies make more revenues and profits, it reflects in their stock prices which increase slowly and steadily over time.
But, Does the stock prices of ALL companies increase over time ?
The short answer is No.
That’s because some companies die or are not able to compete ( E.g Kingfisher Airlines ). In comparison, if you look at Indigo Airlines, it has grown steadily and slowly in terms of both service and revenues and is not only a great brand but a very strong company too, which is reflected in it stock price.
Similarly, while TCS, Infosys and Wipro have become very large companies over the last 20 – 30 years, many smaller IT companies have died.
So, How Does one select which companies to buy and which to Hold / Sell ?
Equity mutual fund companies employ professional fund managers – These are professionals who have large research teams to constantly track which companies are doing well or have the growth potential for future returns. They manage the money and take investment calls to best invest the money.
If you have never invested in Equity Mutual Funds and most of your money is locked up in Fixed Deposits / PPF and other income type products, you are doing a great disservice to your money.
Start small ( with as low as Rs 5000 or Rs 1000 per month ) and increase as you learn more about them.