Beginning your financial investment journey can be exciting and daunting at the same time, particularly for beginners. Mutual funds are ideal if you are a beginner as they allow you to invest in a wide variety of assets at low cost and effort. You get to invest in assets like stocks, bonds, gold and commodities with an amount as low as Rs.100/month.
For instance, you can invest in the newly launched Groww Banking & Financial Services Fund, an open-ended equity scheme focusing on investments in the banking and financial services sector, with just Rs.100 via SIP. The New Fund Offer (NFO) of the scheme will begin on January 17, 2024 and close on January 31, 2024.
Equity mutual funds enable you to create wealth by investing in the stock market. However, it's beneficial to invest in equity mutual funds for long-term positive benefits.
This blog will provide you with a detailed guide on the best equity mutual funds, and their benefits along with a list of top-rated equity mutual funds you wish to invest in 2024.
What Are Equity Mutual Funds?
Equity funds are one of the most popular categories of mutual funds that invest in stocks of different companies. The companies can belong to various segments of the economy such as energy, infrastructure, banking, FMCG and more.
Unlike direct stock investments, you don’t have to do anything. The fund manager will perform stock selections to deliver maximum returns from the investment you made as per the scheme’s objective. These funds need to invest at least 65 per cent of their total assets in stock of different companies.
The main aim of equity mutual funds is to generate potentially high returns. However, the returns from an equity fund will depend largely on the performance of the market and selected companies. If you are a risk lover and looking for higher returns in the long run, equity funds investment will be an ideal option for you.
What Are the Different Types of Equity Mutual Funds?
There exist different kinds of equity mutual funds classified according to investment strategies and market capitalisation.
Based on these characteristics, here are some different types of equity mutual funds:
Small Cap
As per SEBI guidelines, small-cap funds are those equity funds where you need to invest about 65 per cent of funds in small-cap stocks. The remaining funds can be invested in other stock categories.
Mid Cap
Mid-cap funds also need a minimum investment of 65 per cent of their assets in mid-cap companies.
Large Cap
For large-cap funds, a minimum of 80 per cent investment is needed in stocks of large-cap category companies, as per SEBI.
Large and Mid-Cap
Large and mid-cap equity funds have their investments in both large and mid-cap stocks. Here, as per SEBI guidelines, these funds need to invest a minimum of 35 per cent for both of these categories.
Multi Cap
With multi-cap funds, an investment of a minimum of 75 per cent is required in equity and equity-related investments with 25 per cent in small, large and mid-cap stocks.
ELSS
Equity Linked Savings Scheme (ELSS) can invest in different types of stocks and provides tax benefits of up to Rs. 1.5 lakh/year under Section 80C.
What Are the Benefits of Investing in Equity Mutual Funds?
Here are some advantages associated with the top-ranked equity mutual funds:
Diversification of Portfolio
With equity mutual funds, you can invest in a wide variety of stocks. This thereby enables you to undertake a more reliable strategy of investment through diversification of your investment portfolio.
Small Sized Investment
Equity mutual funds are ideal for investors with low budgets. Top-rated equity mutual funds enable individuals to invest in stocks, thereby promoting accessibility
Regulation
Equity mutual funds are categorised under regulatory frameworks. This thereby ensures a level of security and transparency. Moreover, investors achieve ultimate confidence and trust by operating in the stock market.
Mitigating Risks
Equity mutual funds are typically diversified in nature. This thereby helps to mitigate the typical risks of volatility in direct stock investments. This approach promotes stability in your portfolio and reduces the risks of market fluctuations.
Active Engagement
By investing in equity mutual funds, you need to stay informed and monitor your investments. At the same time, you should keep an eye on the market trends and economic indicators to reach an informed decision-making
What Are the Best Equity Mutual Funds in India to Invest in 2024?
Just like other market-linked investments, there is high risk involved with equity mutual funds. However, if you are a risk-loving investor, you can choose to invest in the top-ranked equity mutual funds. Furthermore, keep in mind that investing in equity mutual funds for a tenure of 5 years or more yields you high returns.
The following table provides a list of equity mutual funds in India that you might consider investing in 2024:
Fund Scheme| Assets Under Management| 5 Year Returns (in %)
ICICI Pru Technology Direct Plan- Growth- Rs. 8794 crores- 23.99
Quant Small Cap Fund Direct Plan- Growth- Rs. 2580 crores- 24.52
Quant Tax Plan Direct- Growth- Rs. 2506 crores- 22.50
SBI Technology Opportunities Fund Direct- Growth- Rs. 2832 crores- 23.47
Tata Digital India Fund Direct- Growth- Rs. 6804 crores- 24.49
HDFC Large and Mid Cap Fund Direct- Growth- Rs. 15,021.94 crores- 21.26
ICICI Prudential BlueChip Fund Direct- Growth- Rs. 47,928.62 crores- 17.83
Nippon India Large Cap Fund Direct- Growth- Rs. 20,217.64 crores- 18
HDFC Top 100 Fund Direct- Growth- Rs. 30,261.72 crores- 16.73
HDFC Mid Cap Opportunities Fund Direct- Growth- Rs. 56,032.99 crores- 23.83
Nippon India Multicap Fund Direct- Growth- Rs. 24,590.17- 20.08
Franklin India Smaller Companies Fund Direct- Growth- Rs. 11,397.83- 24.20
Nippon India Small Cap Fund Direct- Growth- Rs. 41,018.84- 29.94
Sundaram Mid Cap Fund Direct- Growth- Rs. 6,804.62- 26.40
Final Words
By now, you must have a clear understanding of the concept of equity mutual funds and which one to choose among the best equity-linked savings schemes. Equity funds have diversified fund portfolios, better accessibility than direct stock investments and are easily manageable. Choosing the right mutual fund will help you build a large corpus over some time.
Before choosing an equity fund, you should know the objectives of equity funds and map them as per your risk profile. To conclude, you can invest in your chosen equity mutual fund for the long or short term, based on your set financial goals. However, it is advisable to invest for the long term to yield positive returns.
