Mutual Fund is a Collective Investment tool where investments are pooled in from the investors and invested in Stocks, Bonds, Commodities, Money Market Instruments and other assets. Here the funds are professionally managed by Fund Managers who try to ensure that pool of funds are invested wisely and provide better return in the long run.
Mutual Funds are monitored and governed by respective authority in various countries like Securities and Exchange Commission (SEC) in United States, Securities Exchange Board of India (SEBI) in India and etc’s.
Investors too should keep in mind that mere investment in Mutual Fund does not guarantee high returns from the first day itself. Like everything else which operates in the market they too will have days when they will outperform or underperform depending on market dynamics.
To know more about Mutual Funds and how they function follow the Link to my earlier Posts given below:-
Now let’s look at the Benefits of Investing in Mutual Funds:-
Statutory Regulatory Authority: In most of the countries including India, Mutual Funds are regulated by concerned authority and it has to take prior approvals and inform the stakeholders in case of any changes in Fund policy or any Fund related issue. Hence your investments are secured against any frauds.
Management of Funds by Professionals: Funds are managed by experts who are trained or possess the expertise to handle such Funds and have knowledge about the market. They are skilled to handle large pool of funds in the Real Time market and can readily access the market information and execute trades related to it.
Low Cost of Investment: Investors start investment in Mutual Funds with as little as `500/- per month (SIP). Hence small investors can also avail the benefits of the fund and reap benefits in the long run.
Diversification of Funds: Mutual Funds are diversified investments so it helps in minimizing the risk and at the same time make optimum utilization of the market. If investment in one of the security declines even then the chances of making up the losses remain from other investments. Hence investor is shielded from incurring heavy losses.
Transparency: Mutual Fund is very transparent in nature and if an investor does not have much knowledge about the market he/she will be able to track his investment through the units allotted to him/her and the NAV of the Fund.
Liquidity: Mutual Funds are open ended schemes and procedure to invest and withdraw from the fund is also very easy. You can also avail Mutual Funds online.
Convenient and Flexible Investment: Investment option is also open in the hands of investor as he can opt for one time lumpsum payment, monthly or periodic investment option. You can also increase or reduce the investment as per your need.
Plan for All: Mutual Funds have investments options for all, you can invest in Equity, Debt, Hybrid or even in Gold depending on your preference. Thus it caters to everyone from conservative to aggressive investors.
Tax Benefits: Investments in ELSS also attract deductions on Investments. Moreover investment in any class of fund for over a year will be considered as long term for tax purpose.
Better Returns and Minimal Risk: Compared to other Financial Products it offers better returns and the risk involved is also minimal. Investors just need to be a bit patient.
Can Withstand Inflation: Mutual Fund returns are generally higher than the rate of inflation so in the long run it is beneficial as compared to fixed returns investment options.