Few things to remember while investing in equity market
Unlike banks, the equity market is based directly on share market. The liquidity of money is lower as compared to banks. So one must be very alert before investing in any equity fund. The equity funds generally have its eye on a certain sector of market. It may also choose to play on a level of risk factor.
Every mutual fund advertisement on the T.V. states that mutual fund investments are subject to market risks. The problem is that level of risk is not only confined to the market alone. Private equity firms try to raise new funds after two to four years as the previous fund has been fully utilized for investment.
One of the biggest problems of equity funds are the costs. These are the main reasons for low returns. The industries charge the average user and get away with the costs. Most average users do not know what they are even paying for. Here are some segments where the cost goes.
One of the first cost is the cost of keeping a fund manager. The cost for this is about 0.5% to 1% of the total fund. So a huge portion of the money from the fund goes to the fund managers. The next cost is the administrative cost. It is very necessary at the same time unnecessary part. Costs like postage, customer service, record keeping, weekly money for parties etc are included in this cost. The last one is a very unnecessary part and firms with these facilities should be avoided.
Loads are sometimes found in equity fund plans. Loads are the fees of a salesperson for selling any fund. So it is better to avoid any fund with loads. If a person puts 1000 rupees in an equity fund, about 50 rupees goes for paying loads and the rest is put to the fund.
So before investing in any equity fund, it is advisable to keep the following points in mind. The risk is yours if you don’t.
Most of us hardly have any idea about equity market. This post has clarified the matter for the common people. But before investing in any plan it is better to learn the pros and cons about that plan. By doing so you are making sure that your investment is not going to be wasted. Get updated about different policies and financial plans in the market.
Before making any financial decision you have to make sure that, you have all the information. Discuss with a financial adviser. You could also try out the financial blogs. You would find updated information on financial issues. You could also try talking to your friends about your financial decision.