Things to Know- Direct Equity and Equity Funds

Here are the few things that you must know about direct equity and equity funds:
1. Equity mutual funds allow you to invest in equity through a portfolio created and managed to a process by a specialist. So they offer the benefit of diversification with a small investment.
2. When a mutual fund buys and sells stocks, there is no tax impact on the scheme. In direct equity investors have to incur the capital gains tax and securities transaction tax every time they sell shares.
3. In direct equity, the cost of transacting shares in a portfolio has to be borne by the investor. The option of direct plans in mutual funds allows investors to benefit from lower expense ratios.
4. Equity fund managers rebalance portfolios to reflect economic scenarios that affect a stock. Direct equity investors usually lack the expertise to rebalance in the light of such triggers.
5. Mutual funds allow investors to structure their investments in a way that suits their requirements. This allows them to enter, exit or switch from funds and assets classes seamlessly and at lower transactions costs.
6. Investors in equity funds have the flexibility to tailor their returns in a way that is tax-efficient and at the same time meet their requirement for income or growth.