While looking into investment opportunities, the foremost challenge that nearly all investors face is a myriad of options. From bonds, stocks, money market securities, shares, to the best combination of one or more of these, but, every option has its own set of benefits and challenges. An investor must consider investing in mutual funds over others to acquire their investment goals. Since their introduction, mutual funds have been a prominent investment option for investors. Their easiness along with other features offers great benefit to those investors with limited knowledge, money or time. To assist you determine whether mutual funds are better for you and your situation, let’s figure out the reasons why you might seriously consider mutual fund investment.
Diversification
The saying ‘don’t store your eggs all in one basket’ really works right for the concept of brilliant investing. Diversification reduces the threat of loss by spreading your money throughout different industries as well as geographic regions. On purchasing mutual funds, you will be offered with the instant benefit of immediate diversification as well as asset allocation without more amounts of cash required to develop individual portfolios.
Professional management
Your money will be managed by skilled professionals. The professionals also have a research team along with them who will consistently analyze the prospects of performance of companies. They also choose perfect investments to attain the main goals of the scheme. It will be a continuous process that takes expertise and time that will add up value on to your investment. Fund managers are in a good position to handle your investments and receive higher returns.
Tax benefits
Investments that are held by investors for duration of twelve months or more become eligible for capital gains and also taxed accordingly. These investments come with the benefit of indexation.
Affordability
Being a small investor, you would feel that it is not feasible to purchase shares of larger companies. Mutual funds typically sell and buy securities in great volumes that facilitate investors to get benefited from reduced trading costs. Due to the minimal investment needs, the smallest investor can get head out on mutual funds. You can invest just with a minimum of 500 rupees in a systematic investment plan on constant basis.
Wider options
Mutual funds come with a plenty of schemes that will cater to your requirements over a lifetime. While you get into a new stage of life, all you have to do is sitting down with your financial advisor who will guide you to rearrange your portfolio to meet your altered lifestyle.
Liquidity
By means of open-end funds, you can restore all or some part of your investment you wish any time and obtain the present value of the shares. Funds tend to be more liquid than most investments in bonds, deposits and shares. Further, the process is standardizes, thus making it efficient and quick so that you can have your cash in hand the sooner possible.
Transparency
The performance of mutual fund is often reviewed by different publications as well as rating agencies, making it simple for investors to compare fund with another. Being a unitholder, you are offered with regular updated, for instance regular NAVs, and information on the funds’ holdings and the strategy of fund manager.
Rupee-cost averaging
With the feature of rupee-cost averaging, you are investing a particular rupee amount at constant intervals irrespective of the unit price of the investment. Resultantly, your money tend to buy more units if the amount is low and lesser units if the amount is high, which can indicate a reduced average cost per unit over the course of time. Rupee-cost averaging enables you to discipline yourself by making investment every month or even quarter instead of making sporadic investments.
Regulations
All mutual funds are needed to be registered with SEBI. They are liable to follow strict terms intended to protect investors. All the functions are also monitored regularly by the SEBI.
Mutual funds are tax-efficient investment avenues that can make reduce your tax burden and increase your wealth at the same time.