Why to invest in Mutual Funds?
Mutual fund is a collection of stocks, bonds, money market securities or combination of these which is managed by fund manager or a company that we hire and for that we pay a certain amount of money to them. Mutual Funds investments have many advantages which attract investors’ attentions. These advantages are discussed below:-
- Professionally sound management:- Mutual Fund investment provides investors a team of highly qualified and professionally sound managers who manage all assets collected from the investors. The fund managers are responsible for handling all the financial decisions based on the fund performance.
- Diversification:-Mutual fund investment is diversified in nature which provides a broad range of securities that limits investment risk and in turn it plays very important role in the success of any portfolio. For small investors who do not have sufficient money to allocate for their assets, mutual fund provides a great investment opportunity.
- Flexible:- Mutual fund investment is also called as flexible investment where an investor can switch his funds easily from one fund to another within same mutual fund family which helps to easily rebalance portfolio.
- Time Saving:- Time saving is an ideal investment options which helps investors saving time to study the market trends because all financial decisions are taken by the fund manager.
- Low Cost:- Mutual funds offers the low cost of investment compared to direct investment in capital markets. In direct investment to capital market, most of the stock options require sufficient money where as one can start with mutual fund as low as Rs. 500 and get the advantage of long term equity investment.
- Less Expensive:- Mutual fund investment is less expensive compared to direct investment in capital markets because brokerage and fees charged is very less.
- Liquidity:- Mutual fund investments provide better liquidity options where an investor gets his money back promptly. In open ended schemes, an investor gets money back without any delay at Net Asset Value (NAV) at that time. In close ended schemes, it is traded in the stock exchange.
- Transparency:- Mutual fund is regulated by SEBI (Securities and Exchange Board of India) which have made the industry very transparent. Investors can easily track all the investments that have been made on behalf. Apart from that, investors can see the fund where money is going and also track the current value of total investment.
- Variety of Options:-Mutual fund offers investor variety of options which depend on both the investment objectives and the maturity plans such as income fund, growth fund, liquid fund, balanced fund, tax saving fund, open ended fund, closed ended fund etc. Depending on the investment objectives, investor can easily pick the best options amongst the available options.
- Higher Return Potential:- Mutual funds have the potential to generate higher returns in medium to long-term investment because it provides investors an option to invest on a various range of sectors and industries.