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Equity SIP

Definition

Equity SIP involves systematically investing in equity mutual funds that primarily invest in stocks/shares of companies. It is the most popular SIP type and offers the highest potential returns along with higher volatility. Ideal for long-term wealth creation with 7+ year horizons.

In Simple Words

Equity SIPs invest in the stock market through mutual funds. The fund manager selects stocks based on the fund's mandate — large cap funds invest in top 100 companies, mid cap in 101-250, small cap in 251+, and flexi cap across all sizes. Over 10-15 years, equity SIPs have historically delivered 12-15% CAGR in India.

Real-Life Scenario

Deepak invests ₹15,000/month across equity categories: - Large Cap: ₹5,000 (stability) - Flexi Cap: ₹5,000 (all-weather) - Mid Cap: ₹3,000 (growth) - Small Cap: ₹2,000 (aggressive growth) After 15 years at weighted average 13% return: Total invested: ₹27L Estimated value: ₹58.5L Returns: ₹31.5L (117%)

Key Points to Remember

Highest return potential among all SIP asset classes

Higher volatility — requires 7+ year investment horizon

Categories: Large Cap, Mid Cap, Small Cap, Flexi Cap, ELSS

Historical CAGR: 12-15% over 10+ year periods

Ideal for goals like retirement, wealth creation, child education

Tax: STCG 20%, LTCG 12.5% above ₹1.25L exemption

Start with large cap/flexi cap for stability

Add mid/small cap only if horizon is 10+ years

Frequently Asked Questions

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What is the minimum recommended SIP duration for equity funds?

Summary Notes

Equity SIP is the primary wealth creation tool

Minimum 7-year horizon for equity SIP

Diversify across market caps based on risk appetite

Index funds offer simplest, cost-effective equity SIP