Why should you invest through Mutual Funds?

The best option to fulfill your personal financial goals by creating wealth is investing in mutual funds, and here are 10+ advantages that clearly explain why you should invest through Mutual Funds.

1. Higher Returns

Mutual funds help in investing in a wide range of market-linked instruments that have proven track record of delivering superior returns in comparison to traditional investment options. Debt funds have consistently beaten Fixed Deposit (FD) returns, and they have proven to be a good investment choice for investors with lower risk appetites. However, the adventurous investors can always go for equities, which are a great investment avenue, for higher, inflation-beating returns. As per data, equity funds generated 11-15% returns over the last 10 years. With 4-6% average rate of inflation, anyone could build on their savings by properly identifying and investing in good mutual funds.

2. Diversified Portfolio

Mutual funds invest in different types of asset classes. Some are pure debt funds, some invest in equity, while others are balanced or hybrid. You get exposure to a variety of shares or bonds or fixed income instruments, which is the primary advantage of investing in a mutual fund. When you financed through a mutual fund, you get a basket of several kinds of stocks with high as well as low risk, and they also compensate each other’s faulty performance. Altogether, they not only grow but protect each other. If you lack investor’s knowledge and have less time to spend on researching stocks, go for mutual funds.

3. Variety: A Mutual Fund for Everyone

The best part of mutual funds is that currently, there are more than 2,000 active schemes to choose from. There are always funds that match your risk appetite, investment horizons, and personal financial goals. There are debt funds that are the least risky, balanced, or hybrid funds with moderate risk, and equity funds that involve the highest risk. However, as the reward is directly proportional to risk, the higher the risk, the higher the returns.

There are many choices, even within categories like a large-cap equity fund, which is less volatile and offer lower but stable returns. On the other hand, mid-cap or small-cap equity funds can fluctuate wildly but have the potential to give higher returns in the long run. The debt funds invest in corporate paper, therefore offer higher returns compared to gilt funds but will carry higher risk.

4. Minimum Investment

You can get started with investing a minimal amount in most Mutual Funds. You can start a SIP with as little as Rs 500 a month. The advantage is that you do not have to wait until you accumulate enough money to make investments. Hence you can make optimum use of cash available at present and maximize returns.

5. High Liquidity

Investors in mutual funds always enjoy a high level of liquidity. As most funds are open-ended mutual funds, you can buy and sell your units at any time to meet your financial needs. The value of the fund is based on the fund’s net asset value (NAV) for that day. The money hits your bank account within two working days. Close-ended funds can be liquid and freely bought and sold once these funds are listed on a stock exchange even though they’re for a fixed duration. There are even Instant Redemption Funds where your money gets credited to your bank account within 60 seconds of selling an Instant Redemption Fund.

6. Convenience: Invest in a Lump Sum or through a SIP

Flexibility is another advantage of mutual funds. You can either invest a lump sum if the amount is ready or put in small amounts over some time through a Systematic Investment Plan or SIP.

7. Systematic Investment Plans (SIPs)

SIPs make investment simple, and your investment habit easily gets disciplined. Start investment with as little as Rs 100 a month. Once you set up a bank mandate with an online platform, you can set up a SIP with any amount in a Mutual Fund of your choice for monthly investments on any specific date of the month. The money is debited automatically a day or two before that day every month and invested in that scheme. Thus, there is no hassle of manually investing every month.

8. Cost-Efficient

Mutual fund investment is quite cost-efficient. Buying equity, stocks, or bonds directly costs brokerage, Securities Transaction Tax (STT), and other charges. As mutual funds do bulk transactions and manage large amounts of money on behalf of tens and thousands of individual investors, they can get the advantage of economies of scale and lower brokerage rates, thus reducing transaction costs that benefit investors in mutual funds.

9. Transparency

A mutual fund makes its portfolio details publicly available every month, so if needed, the investors can check what the fund manager is doing. Tracking the performance of your investments can be done online easily.

10. Professionally Managed Funds

Mutual funds are managed by fund managers professionally and analysts who always do research, analyze, and study recent and potential holdings for their mutual fund in the interest of investors. Similarly, your investment advisor studies and evaluates mutual fund managers to help you pick the best funds to meet your goals. The expertise of these professionals maximizes the chances of your earning return. Above all, mutual funds are governed by SEBI and are highly secure and transparent.

11. Less Tax Liability

While investing in mutual funds, you can also save income tax. If you invest in an Equity Linked Savings Schemes (ELSS) that comes with a lock-in period of 3 years, it helps to reduce your taxable income up to Rs 1.5 lakh U/S 80C of the Income Tax Act – 1961.

Therefore mutual funds have always been an excellent and convenient way to invest your money. And if you are a lay investor, and do not have the knowledge or time to invest, it’s always better to rely on the experts. A good investment advisor always helps to maximize returns and minimize risks.That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh