Mutual Fund & benefits of investing in Mutual Fund

Mutual Funds may not look sturdy for most people but are an excellent way to achieve your financial goals. They are not only cost-effective and diversified but also offer professional fund management. Besides, investing in mutual funds is a smart option for almost any kind of investor. However, not many are plugged-in with the benefits of Mutual funds and hence, miss to experience the degree of righteousness. Therefore, there are many qualities of Mutual funds to learn. However, investing in them is much easier than making a list of the advantages! This article will help you know what exactly Mutual fund is and how one can benefit out of it.

What are mutual funds?

A mutual fund is an investment machine which is typically a pool of money collected from different investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets through the said fund. Or to make it simple, mutual funds are like baskets and each basket holds certain types of stocks, bonds or a combination of stock and bond to combine for one mutual fund portfolio.

What are the features of Mutual Funds?

1. Affordable

mutual Funds are one of the most affordable investments as they are bought and sold in large volumes allowing investors to benefit from lower trading costs. Moreover, investors can invest in portfolios that are as low as Rs. 100 or 500 through Systematic Investment Plans.

2. Portfolio Diversification/Risk Diversification

Mutual funds offer a diversified investment portfolio and allow you to invest even a small amount. Besides, the loss is also shared with other investors in the same fund. Therefore, this diversification of risk is one of the key benefits of a collective investment instrument like mutual funds.

3. Liquidity

Mutual funds also have open-ended investment schemes where investors can encash or redeem all or part of their investments at prevailing net asset value, at any point of time. Mutual funds tend to be more liquid than most investments in shares, deposits, and bonds. To top it, a standardized process helps the investors in quick and efficient redemption allowing them to get cash in hand as soon as possible.

4. Transparency

Mutual funds are known to be the most transparent type of investment as investors receive timely and detailed information about the nature of investments. It also helps you know the strategy behind the investments, the exact amount invested in each type of security, etc. Additionally, the performance of a Mutual Fund is reviewed by a number of publications and rating agencies, making it easy for investors to compare one fund to another.

5. Managed by professionals

Mutual funds are supervised by experienced professionals who work towards the fund’s defined objectives. They are also accompanied by specialized investment teams who judiciously study companies, their products, and performance to achieve investment goals. However, this is a continuous process and adds value to your investment and helps obtain higher returns.

6. Helps in minimizing costs

Mutual fund helps investors to benefit from the economics of large numbers as they pool money from a vast number of people with common interest and investment in appropriate funds as per their budget.

7. Choice of Investment

Since mutual funds cater to everyone’s needs, one can always find a mutual fund that matches your risk taking capacity (high, low, medium) or the one which matches your time frame (duration you want to invest up to - long, medium, or short).

Now that you know, what are mutual funds have to offer, let’s know the benefits of ‘Mutual Funds’

Following are the benefits of Mutual funds.

1. Disciplined Investments

Mutual funds encourage investors to invest over a long time horizon which is important in creating wealth. Besides, Systematic investment plans encourage investors to invest in a disciplined manner to meet their long-term financial objectives.

2. Variety in modes of investments

Mutual funds are flexible in terms of modes of investments and withdrawal. One can opt for different modes of investments like lumps sum (or one time), systematic investment plans, systematic withdrawals etc. In addition to that, you can also invest in dividend option if you want regular income from your investment.

3. Lowest investment thresholds

One does not require a lot of money to begin investing in Mutual funds. Most of the companies allow investors to begin investing with as low as Rs. 100 or 500.

The bottom line is that Mutual funds are the most cost-effective way to invest in the fragile market. Since they are simple, systematic and have high-return yielding investment option, especially when you are looking for a good way to build a corpus for financial goals.

Hi this is Somesh from Mumbai. I am working with the one of the leading online insurance broking firm as a customer relationship manager. I like to discuss with customer to solve their problem and queries. More Peoples still unaware about insurance