There is no doubt at all that the mutual funds are one of the most convenient and best ways to invest your hard-earned money. It is essentially a collection of the stocks and bonds. In India, when someone thinks about an investment, then the primary challenge an investor has to face is a plethora of options. From stocks to gold, bonds to bank fixed deposits, money market securities and lots more. Each has its own set of advantages and disadvantages. Furthermore, an investor has to consider the time period, risk and returns on their investments based upon their financial goals. Over the years, the mutual fund industry is seeing a significant growth and the prominent reasons for their increasing popularity among the people are as under:
Managed by Professional Fund Managers
You may not have the necessary knowledge or skills to invest in mutual funds. This is where the role of the fund managers come into play. The mutual funds are managed by the expert and professional fund managers which is required for any investment. The managers have a comprehensive knowledge of the following:
- The companies or sectors where your funds will be invested
- The market conditions
- The economic conditions
- The current happenings in the global markets
The fund managers monitor the market regularly, which may not be possible for a general investor. The managers keep on purchasing the new stocks, which they feel will add value to the fund and exit from those stocks, which may be overvalued or does not add any value to the fund. By this way, the managers, keep on diversifying the portfolio regularly to maximize your investment.
Getting the best returns on their investments is one of the foremost aims of the mutual fund investors to beat the inflation and save for the future. Whether an investment is made for the long or short term, mutual funds increase the possibility of getting the higher returns because an investment is made in different industries and sectors. The debt funds provide good returns to the investors with lower risk appetites when compared with the bank fixed deposits. Furthermore, making an investment in the equities through the mutual funds is also known to provide good returns because of the rupee cost averaging and portfolio diversification.
When you decide to make an investment in the mutual funds, then you are not required to understand the intricate details of the stock market. You do not have to sit in front of the news channels or websites to track the market. This task is carried out by the fund managers. If you want to know about the performance of your funds, then you can it easily on mail. So, it is clear how convenient it is to invest in mutual funds and have a hassle-free experience.
If your goal is to have a secure financial future, then investing in mutual funds can turn out to be a more viable option. When a Systematic Investment Plan (SIP) is started in a mutual fund, then you have to invest a fixed amount every month for a certain number of years or months. You have to show some patience while investing in mutual funds to ensure your returns are compounded. Such a disciplined investing ensures that you are taking a positive step towards your financial future.
This is one of the biggest benefits of investing in mutual funds. An Equity Linked Saving Scheme (ELSS) is one of the types of open-ended diversified equity fund where you can avail tax exemption under section (u/s) 80C of the Indian Income Tax Act, 1961.
Another prominent advantage of investing in mutual funds is that you can sell your mutual funds any point of time to meet your financial needs. You can get the money in your bank account immediately after you sell your mutual fund. Hence, it is quite easy to sell and get the funds when compared with other illiquid assets such as the real estate.
Ease of Entering and Exiting the Fund
A large percentage of the mutual fund schemes, which are rolled out is open-ended. It gives an option to the investor to enter and exit any point of time. As a result, it is a viable investment option for those individuals having short-term liquidity.
Making an investment in the mutual funds can turn out to be profitable, if you are well-informed and most importantly do not take hasty decisions. Always weigh pros and cons before making an investment. Carrying out a comprehensive research work is a key here and if you are disciplined and willing to take risks, then by investing in mutual funds, you can achieve your dreams easily.