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- Mutual Funds
Why Invest in Mutual Funds
Even though mutual fund has gained a lot of popularity, still there is significant number of population don’t invest in it. It doesn’t give you fixed returns. Doesn’t provide any guarantee for your principal. You can’t pick your choice of stock. You don’t get the direct benefit of any security in the form for profit sharing. Then why invest in mutual funds?
You must have also come across a situation where you are thinking why should I invest in mutual funds?
Here are few benefits of investing of investing in mutual funds.
Benefits of Mutual Funds
- Professional Management – Fund Manager
- Diversification – In all sectors of economy
- Return Potential – High Returns/ Post Tax Returns
- Low Costs – Entry/Exit Load
- Liquidity – Anytime Redemption/ Partial Withdrawal
- Transparency – Fact Sheet
- Flexibility – Switching Option (One Scheme to other)
- Choice of Schemes – Various Funds
- Tax Benefits – u/s 80 c
Mutual fund definitely doesn’t give a choice to pick you favorite stock or security but it is picked on your behalf by a fund manager who is a professional and expert in doing so. He is the one who does extensive research of the market and then build a portfolio based on the objective of the fund. He then keeps a continuous track of the investment to generate more returns for the investors. Especially people who don’t have knowledge or time or both, this is the ideal product for them. All they have to just do is invest.
One can invest in mutual funds as per their own convince and the available of the investable surplus. If you have bulk about, you can invest in lumpsum of you want to save some amount by investing over the time period go for SIP, it’s as easy. Investor has an option to opt for dividend or growth based on the money requirement.
Systematic Investment Plan (SIP)
An excellent investment tool in Mutual Fund.
- SIP is an Investment tool where an investor can choose, the product, investment amount, Investment Date and Investment Tenure, so that, the defined investment Amount is automatically debited from A/C and invested on the investment date defined month on month basis for the entire tenure which has been defined.
- It brings discipline to one’s investment apart from Averaging the investment, as it is invested on regular basis right throughout the market ups and downs.
- When the markets are down, the same amount will garner higher units and whenever markets are up, it gets lower units, thus averaging the price of investment.
- Besides averaging the purchase cost of Fund, it adds value to the investor with Power of Compounding.
Power of compounding
It is surly 8th wonder of the world and the magic is for sure shown in mutual fund. The returns which you generate from mutual funds are compounded. So they give you much higher returns as compare to fixed deposit. Mutual funds provide the right avenue for investing in a variety of market-linked instruments, which have time and again delivered superior returns compared to other traditional investment options. Debt funds have consistently beaten Fixed Deposit (FD) returns, and with bank interest rates going south, they present a good investment choice for investors with lower risk appetites. For the more adventurous investors, equities (shares) present a great investment avenue, for higher, inflation-beating returns.
Diversification: Diversification is a very familiar financial terminology to most investors. In the most general sense, it can be summed up with this phrase:
"Don't put all of your eggs in one basket.“
Taking a closer look at the concept of diversification , the idea is to create a portfolio that includes multiple investments in order to reduce risk. These were the points which can help you understand why is it good to invest in mutual funds.