The importance of financial management and smart investments are some of the new lessons that this pandemic taught us. While the stock market is prone to high risk, smart investments plans can reduce the risk factor and yield a higher percentage of profit for you. The key is to purchase and hold the units for the long term to achieve better profit.
If you are looking to invest in a plan that offers benefits over a period of 3-5 years, the Parag Parikh long-term equity fund could be a good option, to begin with.
What is Parag Parikh Long Term Equity Fund?
Parag Parikh Long Term Equity fund was launched in the year 2013 from the house of PPFAS Mutual Funds. It is a mutual fund scheme that follows a multi-cap strategy and invests in both domestic and international stocks. When you invest in the Parag Parikh long-term equity fund growth, it follows a strategy of investing 65.51% of its fund in Indian stock under a multi-cap investment strategy and the rest in off-shore stocks. This distribution of investment is key in delivering a higher return.
Parag Parikh’s long-term equity fund growth is designed on the lines of Warren Buffett’s strategy of buying and holding the stocks long term, as it has the power of exponential growth over time.
Benefits of Investing in Parag Parikh Long Term Equity Fund
1. Diversification of Investment Portfolio
The Parag Parikh long term equity fund growth gives you the unique opportunity of investing in both Indian and international stocks. The corpus is split in a 1:3 ratio, where one-third of the total investment is directed over the stocks of international companies.
The benefit of investing off-shore starts with the opportunity to invest in giants like Google, Facebook, Amazon, Microsoft Corp, etc. This diversification reduces the volatility in your profile because even when the domestic market is underperforming the growth in the international market can balance out the loss and vice-versa. Since the investment in international stock is maintained at 35% and below, the fund is completely hedged and isn’t hit by currency rate fluctuation.
The current trend of increase in foreign education and travel is a big boost to the international market. Other factors like government regulations, changes in company policies, geopolitical events, can have a major impact on the off-shore market.
2. Multi-cap Investment Strategy
Parag Parikh long term equity fund growth follows a multi-cap investment scheme, i.e., it splits the corpus and invests in companies of various scales. It follows a distribution strategy of 34.53% in large-cap stocks, 8.99% in mid-cap stocks, and 19.59% in small-cap stocks for Parag Parikh long term fund growth.
This means that if you invest in Parag Parikh Long Term Equity Fund Growth since the scheme focuses majorly on large cap stocks with high returns, the risk is leveled by the investments made across mid and small cap stocks. This scheme gives a broader scope of higher returns due to diversified fund allocation with its flexibility.
3. Consistent Performer
Parag Parikh’s long term equity fund growth has been in the market for 8 years now and has been consistent in its performance. Of course, you cannot blindly trust a scheme by its previous performance, but Parag Parikh’s long-term equity fund growth has shown the exceptional performance of 14.45% returns in 5 years of the investment term. Whereas the benchmark mutual funds investment schemes NIFTY 500-TRI could only perform up to 8.45% in the same time frame.
The well planned diversification of the scheme has also brought down the volatility of the investment portfolio even lower than the benchmark value of 21.92.
4. Reputable Sectors and Companies in Focus
Parag Parikh long term equity fund growth has been significant, predominantly because of the selection of sectors for investment. Topping this list is the technology sector covering over 36.46%, followed by service and healthcare sectors with 8.71% and 4.13% respectively.
Taking a look at the prime companies that top the list are Alphabet Inc Class A at 8.74% which is an international company, closely followed by Bajaj Holdings and Investments at 7.95%, ITC Ltd at 7.85%, Microsoft Corporation (US) at 6.97% and Facebook Co at 6.46%
5. Entry and Exit Load
As we have discussed above, Parag Parikh long term equity fund growth is a long term plan, the exit load is also charged with respect to the duration of the investment.
No exit charge is applicable on redeeming the fund after a period of 2 years/730 days. Whereas 1.00% exit charge is applicable on redeeming the fund during the time period after completing 1 year and before completing 2years, i.e, between 365th and 730th day. A 2.00% exit charge is applicable on redeeming within the first year of investment.
This investment scheme is devoid of an entry load.
6. Tax Treatment on Returns
The tax treatment for the scheme is based on when the stocks are sold from the day of purchase. If the stocks are sold within a year of purchase, then it is taxed under a short-term capital gain tax of 15%. Whereas if the stocks are sold after a year of purchase then it is charged with a long-term capital gain tax of 10%.
Final Thoughts
Parag Parikh’s long-term equity fund is currently known as Parag Parikh Flexi Cap Fund. This scheme is definitely for anyone who can commit to long-term investment. Following a scheme that opens up the opportunity to invest in stocks beyond the border diversifies the portfolio and equips it to reward better returns. Though the market has underperformed in the recent year, the Parag Parikh long-term equity fund growth has been consistent.
FAQ’s
- Is Parag Parikh Long Term Equity Fund the same as Parag Parikh Flexi Cap Fund?
Parag Parikh Long Term Fund was renamed to Parag Parikh Flexi Cap Fund under the SEBI circular on Scheme Categorisation and Rationalisation by PPFAS in the year of 2021.
- Is Parag Parikh Long Term Equity Fund investment eligible for income tax deduction?
Yes, under section 80C, the scheme of Parag Parikh Long Term Equity Fund is eligible for a tax deduction for up to an amount of 1.50 lakhs.
- What is the option available for the Parag Parikh Long Term Equity fund scheme?
The available option for the Parag Parikh Long TermEquity Fund is the Growth Option as of now.
- How do I invest in the Parag Parikh Long Term Equity Fund scheme?
You can invest in this scheme either online over the site of PPFAS self invest or online distribution partners. You can also apply offline by submitting the documents at any collection point.
The best thing I like about this fund is its international diversification. Without having to open an account with an international broker you can easily invest in top of the line international companies.