Creating Wealth through Equities

The sensex is going up and I can see that I can make money, so I want to invest in the stock market. This is what I hear from every second person. This is a good opportunity to create wealth through equities. Is it so easy, if it was everyone would have been making money. The fact is, it is not, you need to have knowledge and time, and best part is you should also be ready to lose some money if the market falls. As mentioned you need to have knowledge, time and risk taking appetite, not having even one is a sure shot disaster. So what are the options? One option is to go for investing in Equity Mutual funds. In this you are into equities indirectly. Indirectly means you do not own the stocks directly, but you put your money into a fund, which invests into equity.

Some of the benefits of investing through mutual funds are

• Knowledge – This aspect is taken care of because of the fund employs professionals who have the knowledge.
• Time – As these professionals are employed for the fund, they have the time
• Amount – You do not have to do big investments, you can start with as little as Rs.500/-, if you go for portfolio management, the amount to be invested would be a minimum of Rs. 25 Lakhs.
• Cost – the costs of portfolio manager are much higher compared to the costs of a mutual fund, as there are limits placed by SEBI.
• Liquidity – It is easier to get you money back, with minimal paper work.
• Tax – Mutual funds are tax friendly, you do not pay tax as your portfolio is churned, based on the market situation. In case of portfolio managed funds, you have to pay tax on every sell, depending on the period the stock was held.

Looking at the advantages, one can easily say, investing in the stock market through mutual funds is comparatively less risky.