Is it a good idea to invest in equity oriented balanced mutual funds as a first time investor?
Equity Mutual Funds are a good way to invest in the stock market. There are different kinds of equity Mutual Funds. As a first time investor, you could consider investing in large-cap Mutual Funds and Equity Linked Savings Schemes (ELSS).
Large-cap Mutual Funds
Large-cap Mutual Funds invest mainly in those companies that have large market capitalisation. These companies are a part of major stock indices such as the BSE Sensex, Nifty 50, BSE Top 100, BSE Top 200 and so on. Investments in large-cap Mutual Funds are considered to be the safest among all equity fund categories because the companies with large market capitalisation are well equipped to weather negative market conditions. However, during a bull market, investors cannot hope to expect high returns from large-cap Mutual Funds.
These are diversified equity Mutual Funds that offer investors tax benefits. Under Section 80C of the Income Tax Act, investments in ELSS up to Rs. 1,50,000 are eligible for deduction from an investor’s gross total income. ELSS has a mandatory lock-in period of 3 years from the date of investment. ELSS investments, however, have the shortest lock-in period among all tax-saving investment instruments. After the expiry of the 3-year lock-in period, there is no restriction on the redemption of your investments.
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