Equity Mutual Funds vs Other Investment Options
Equity mutual funds are superior to other investment options, this is what many investors must have heard. But it is important for every investor to know the difference of Equity Mutual Funds vs Other Investment Options.
Investors must have a clear idea about investment since half knowledge can prove to be very dangerous in investing and one will never be able to make quality returns on their investment.
Here is a list of equity funds vs other investment options to help you get a distinct idea about how much equity funds can be good for your investment goals as compared to other investment options.
1) Equity funds vs debt funds
| Investments majorly done in stocks of companies |
Investments majorly done in bonds, government securities, certificate of deposits, treasury bills, etc |
| Investments made for generating high returns |
Investments made to safeguard the invested amount |
| Risk is moderately high to high |
Risk is low to moderate |
| Investment held for more than 12 months are liable for LTCG tax |
Investment held for more than 36 months are liable for LTCG tax |
| Suitable for achieving your financial goals |
Best alternative for fixed deposits and savings account |
You can save tax of up to  46,800/- by investing in ELSS funds - a type of equity fund |
There is no option to save tax |
| Investment held for less than 12 months are liable for STCG tax |
Investment held for less than 36 months are liable for STCG tax |
2) Equity funds vs stocks
| Less risk exposure as compared to stocks due to diversification |
High risk exposure |
| Tax benefit as per the Section 80C of the IT Act |
No tax benefit |
| Discipline way of investment with SIP |
Investment in one-go only |
| High cost due to management provided by fund managers |
Low cost as compared to equity funds |
3) Equity funds vs index funds
| High return potential |
Mirrors the market index performance |
| May be actively managed funds |
Passively managed funds |
| High risk |
Low risk as compared to equity funds |
| High management cost |
No or minimum management cost |
| Offers tax benefit under the Section 80C of the IT Act |
No tax benefit |
| Fund managers are actively involved |
Fund managers may not be actively involved as compared to equity Funds |
4) Equity funds vs real estate
| High liquidity |
Less liquidity |
| Pocket friendly investing (investors can invest starting from ₹ 500/-) |
Significant amount is required |
| Tax benefit including the Section 80C of the IT Act |
No tax benefit |
| Less risk as compared to real estate |
High risk |
| Less paperwork required |
A lot of paperwork required |
| Benefit of power of compounding |
No benefit of compounding |
5) Equity funds vs gold
| No fear of theft |
Fear of theft |
| High returns potential |
Comparatively lower returns than equity funds |
| Low liquidity |
High liquidity |
| Cannot be used as a commodity |
Can be used as a commodity |
| Less paperwork required |
No paperwork required |
| Extensive research required |
No research required |
6) Equity funds vs fixed deposits
| High returns potential |
Low returns |
| No lock in period (except for ELSS funds) |
Lock-in period of 5 years |
| High risk |
No risk |
| High liquidity |
Low liquidity |
| LTCG and STCG tax involved |
Tax levied as per the income tax slab |
| Tax benefit as per the Section 80C of the IT Act |
No tax benefit |
These are the differences between equity funds vs other investment options. Investors should consider these points before investing. Invest in equity funds by allocating a certain portion of your funds to optimally create wealth.
Open a free mutual fund investment account with India’s best mutual fund distribution platform & get started with your investment in the best equity funds today.
FAQs
Q
How are equity funds superior to other investment options?
-
A
When returns are considered, equity funds are superior as it has high returns potential than most of the other investment options.
Q
What is the difference between equity funds and debt funds?
+
A
Equity funds majorly invest in shares of companies whereas debt funds invest in bonds, treasury bills, certificate of deposits, etc
Q
Does equity investing require a lot of money like real estate?
+
A
Equity funds are very pocket friendly that makes it possible for investors to invest small amounts starting from ₹ 500/- unlike real estate.
