10 Benefits of investing in mutual funds

Apr 25, 2018
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Mutual funds have been successful in sensitizing the public about the benefits of investing in stocks and bonds. There was a time when most of the investors were satisfied with fixed deposits and recurring deposits in banks and post offices. But now, they have a viable alternative in the form of mutual funds. There are several benefits of investing in mutual funds. We have discussed some of them here in this post.

Managed by experienced professionals

The AMCs hire the best fund managers for managing mutual fund schemes. These professionals have the required qualification and previous experience of the funds market. Thus, your corpus is generally safe in the hands of a revered fund manager. The professionals will analyze carefully before creating and managing a portfolio that can generate maximum returns.

Start as low as Rs 500

While dealing with mutual funds, you don’t need a large corpus. You can start from as low as Rs 500. Gradually, you can increase the amount as per your discretion. Thus, mutual funds are favorable for every investor, including students and housewives. Ample of mutual funds offer investment options at variable prices. You can compare mutual funds to identify the best one for yourself.

Online Management

You don’t need to step out of your home to manage your investments. From the comfort of your home, you can evaluate different mutual fund schemes, create a portfolio, complete KYC compliance, and start investing immediately. Further, you will receive timely updates regarding your investments.

Secure & Regulated Investments

There have been cases in the past wherein investors have been robbed of their money. But now, due to stringent norms, your money is completely safe. Securities and Exchange Board of India (SEBI) is the chief regulator who ensures AMCs comply with the norms and conditions. KYC procedure has also strengthened the security factor.

Diversified Investment Options

In a collective manner, mutual funds comprise of stocks, bonds, and money market instruments. Now, mutual fund schemes invest money in different proportions. Some might be heavily biased towards stocks (equity funds), some towards bonds (debt funds), and most of them offer a mixture of everything. Thus, mutual funds ensure a definite exposure to all investment options.

Tax Savings

For those who are biased towards tax savings, they can consider equity-linked saving schemes (ELSS). Investment up to Rs 1.5 lakh per annum is exempted from income tax under Section 80C of the Income Tax Act. But yes, there is a minimum lock-in period of three years.

Flexible Time Limits

Mutual funds are a perfect investment option for those who have definite plans in their life. If you are 25 years of age, you can plan mutual fund investments to fund your car and house. If you think about the long term, you can start investing to secure funds for your child’s education and marriage.

Varying Risk Profile

Depending on the capability of an investor to take risks, mutual funds offer variable schemes depicting varying risk profile. For example, debt funds and liquid funds have the lowest risk. Thus, your corpus will be safe against market fluctuations. But the returns will be comparatively lower. The equity-oriented bonds carry high risks but the returns are also equally rewarding.

SIPs and Lump Sum Investment

For the salaried class, systematic investment plans (SIPs) are the most feasible option. You can choose to invest a particular amount per month. If you have a large corpus, you can simply invest it in a single go via lump sum investment. Both are feasible but yes, SIPs ensure higher gains in the long term.

Dividends and Growth Plans

When you invest in mutual funds, you can either opt for dividend plan wherein you will receive profits at periodic intervals or you can opt for growth plan wherein your profits will be reinvested along with the capital. Mutual funds give you both the options, thus, making them a preferable investment medium.

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