Contrary to the image that private equity has earned in developed countries, the majority of private equity investments in emerging economies are not based on highly leveraged deals. It is primarily growth equity, which invests in and supports small and medium-sized firms, the engines of employment creation. Emerging-market fund managers hold minority stakes in the firms they invest in, transforming themselves into true partners rather than passive financial investors. In addition to providing cash, fund managers are starting to emerge, with whom IFC collaborates to deliver the skills that these rapidly expanding firms need as they develop. For example, growing from 20 to 100 employees necessitates implementing a comprehensive Human Resource system, improved marketing of your goods, and fully audited financial records. Fund managers give practical learning business assistance to help firms move through these fundamental shifts.
Is Investment in growth funds an intelligent option?
Investments in growth funds have a high degree of risk. Because of this, you should only pick growth funds if you are willing to take a high degree of risk. That's why you might expect big profits from it. If you're nearing retirement, it's best to steer clear of these funds. Investing in it over a lengthy period is beneficial. As a result, only invest in them if you are ready to take on some risk and can commit to a time horizon of five to ten years. Even if you can quit the fund early, there is an exit load associated with doing so. There are no other returns, and your profit will only come from buying the funds at a higher price than you paid for them. If you believe this is a good fit for your investing personality, then go ahead and put your money into growth funds.
Benefits for Growth Equity Funds
Exciting investment opportunities
Many investors are attracted to this fund because of the possibility of capital growth. There is a lot of time and effort to find and select these stocks by professional fund managers.
Knowing that growth funds are for those with a higher level of risk tolerance is critical if you want to invest in them. On the other hand, funds offer the potential for sizeable long-term growth.
Vulnerability in the financial markets
Growth funds have the unfortunate characteristic of being very volatile, with stock prices rising and falling at random intervals. As a result, only investors with a strong tolerance for risk should consider it.
Protracted capital gains tax, or Products and services, is levied at 10% on profits above Rs 1 lakh that have been kept for more than a year. However, value diversified equity funds may be taxed more favorably than other mutual funds.
The expense ratio for these funds will be higher because of the management fee. You'll also have to pay AMC a portion of your annual profits to cover the expenses.
Exceptional financial planning
A growth fund is managed by experts who select growth equities for investors. The fund managers are in charge of deciding which stocks to acquire and sell. As a result, your involvement is reduced to that of a spectator.
Portfolio with a wide range of assets
Investing in a mutual fund with a combination of growth and value companies provides diversity. The absolute risk of Investment in market volatility is reduced to a certain degree.
Concerns about Growth Equity Funds
A growth fund requires a long-term commitment of 5 to 10 years if you wish to reap the rewards. Accordingly, a growth fund is not suitable for investors looking for a speedy return on their Investment. You may invest in growth funds for long-term capital appreciation if the following information follows your investment objectives and risk tolerances. Now is the time to start investing!