On registering profits from business, while some entrepreneurs put back the gains into the company for further growth, others consider investing the returns in avenues with the potential of generating higher profits. Here’s where equity mutual funds can help.
Equity funds invest in stocks of distinct companies. They might even support some of the money market and fixed-income financial products. The right equity fund generally offers inflation and fixed-income beating returns. Their compounding effect provides the opportunity to generate excellent money over the long-term period.
Discussed here are some crucial reasons why entrepreneurs must invest in equity funds.
Finance the future capital needs of the business.
Equity mutual funds yield higher returns than term deposits and debt funds. You can reinvest such returns in your business during a financial crisis. Also, you may consider liquidating your returns from equity funds if any specific year, your gain from the company is insufficient or you are looking to start a new range of products.
Attain your financial goals.
Equity fund investments can even assist in meeting your personal financial goals. This is possible because equity as an asset class has the potential to generate fixed income and inflation, beating returns over the long term by a wide margin. However, you must select an equity-associated fund based on your investment time frame and risk tolerance level. Do not worry; not all equity mutual funds are high-risk investments. The risk level differs from one mutual fund to another. However, to make the most out of equity funds, you must remain invested for the long term, as this way, you are likely to reduce the chances of losing any money.
Prevent funds from lying idle.
One important rule that all entrepreneurs must learn is to never keep their money idle in a bank account. This is because a current or savings account can never generate returns like a market investment instrument. If you cannot find a way to invest your money in your business to develop a good return or think it is the incorrect time to do so, you can invest in equity funds. Doing so helps you to grow your money, which you can use in the future to generate higher returns from your business.
Convenient to purchase and redeem
You can buy equity mutual funds easily through the online mode. Moreover, the best part is you can redeem your equity investments anytime in events of financial need without incurring any exit load.
Given the availability of a vast range of benefits, you, as a budding entrepreneur, must not think twice before putting your profits from your business in an equity fund. If you are uncomfortable with putting a lumpsum amount into an equity fund investment, you may opt for the SIP mode of investment. In the SIP mode, you may use an online SIP calculator to compute the monthly SIP contributions you must make towards the preferred mutual fund to attain your required corpus within the deadline. Once you know the monthly SIP contribution figure, you can begin your market investment systematically through the SIP mode.