Mutual funds are a way of pooling the resources of multiple investors and investing money in securities to achieve an investment objective according to predetermined guidelines. The investment objective is largely determined by the investor’s willingness to accept risk. Managing their own money is challenging enough for most investors and the task of studying and analyzing different companies adds to their challenges. Mutual fund investing provides you with a professional fund manager at a nominal fee. Come, let us know what are the benefits of investing in it.
Benefits of investing in mutual funds
liquidity
Any person can easily sell mutual funds to meet his financial needs. Once processed, the money is deposited into your bank account within a few days. It is easy to buy units in open-ended mutual funds and it is equally easy to exit the scheme. However, most funds charge an exit load when you sell units of your scheme.
Managed by experts
One of the main reasons why mutual funds have become a preferred investment option among a large number of investors in India is that they are managed by market experts.
Diversification
Market movements determine the performance of mutual funds and the risks associated with them. This is why investments are usually made in multiple asset classes such as equity, money market securities, debt instruments etc. so that the risk is spread.
meeting financial goals
Investors have access to different types of mutual funds and hence, they can find schemes that are ideal to meet their financial goals, be it in the long term or short term.
Low cost for bulk purchasing
The higher the number of mutual fund units you purchase, the lower will be the cost as commission charges and processing fees will be lower.
SIP is a great option
SIP in mutual funds is a great investment option as most people do not have a lump sum amount to invest in mutual funds. If you are salaried, you can set aside a fixed amount every month and it will be invested in mutual funds. SIP can also help you benefit from market fluctuations.
Investing is very easy
Investing in mutual funds is a very easy process. All you need to do is identify your financial goals and decide how much money you want to invest to achieve them and the fund manager will take care of the rest.
Support is also available in tax matters
Investing in tax-saving mutual funds such as equity-linked saving schemes can help you avail tax benefits up to a limit of Rs 1.5 lakh. According to BankBazaar, although you will have to pay tax on long term capital gains if the investments are held for more than a year, you can still save a lot of money on tax under Section 80C of the Income Tax Act.
Security
It is often heard that mutual funds are less secure than bank products. However, if you assess the fund house from which you buy mutual fund units, apart from the assessment of the fund manager, your capital will be safe.
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