Five Reasons that Justify Mutual Funds Are Best for You

Author: Raghav Mehera

Ever wondered why mutual funds are among the most sought-after investment route when the market is flooded with a plethora of options? Simple! They are easy to understand, affordable, flexible and offer a large variety of investment possibilities. And let’s not forget that mutual funds are extensively regulated by SEBI and hence safe, secure and extremely transparent. In short, they are a good fit for the financial goals and lifestyle of the layman.

Let’s delve a little further to get some insight into why mutual funds are an invaluable tool for your investment needs. Read on for 5 top benefits.

  1. Higher Returns:

Needless to say, investment is all about generating wealth for the future. Mutual funds deliver excellent returns when compared with other investment options. Debt funds provide steady income to conservative investors while equities are perfect for those with a higher risk profile. There is documented evidence that equity funds have earned investors a hefty 11-15% return over the last decade.

  1. Professional Management:

Investment in the securities market requires skill and extensive research. Most people have neither the time nor inclination to scour through financial data. Mutual funds are managed by highly qualified professionals who have the know-how and expertise to make informed decisions. They park the money in stocks that have been carefully researched and analysed in terms of performance to ensure the investors get high returns. Not to mention, the fund managers constantly monitor all variables and know exactly when to buy/sell or alter the portfolio for a successful outcome.

  1. Systematic Investing:

This avenue offers the simplest way to invest money on a regular basis. There are many mutual fund companies that allow investors to start with as little as Rs.500 per month through a SIP (Systematic Investment Plan). The process entails money getting pulled from a bank account and being directly invested in the mutual fund on the same day of the month for a specified period of time. This inculcates the habit of disciplined investing.

  1. Liquidity & Tax Benefits:

Most mutual funds offer a high level of liquidity as they do not come with long lock-in periods. You have the liberty to make withdrawals as and when the need arises. The cash is credited back to your account within a few days. However, it’s smart to retain the investment for a long term to enjoy higher returns. You can also avail tax benefits under 80 C on investments of up to Rs.1.5 Lakhs in Equity Linked Savings Schemes (ELSS) that comes with a brief lock-in of just 3 years.

  1. Diversification:

Here’s another reason that justifies the famous adage; Mutual Funds Sahi Hai! They provide the investor with in-built diversification. We all know the significance of diversification in investments right? It is a technique that lowers risk and helps in wealth creation. By encompasses various types of asset classes in a portfolio, the negative impact of one investment can be cushioned by the gains of another. The trick is to possess an investment portfolio with schemes that strike the right balance.

The bottom line is that mutual funds come with multiple benefits. Apart from being a convenient and hassle-free, mutual funds allow you to own stock across a variety of financial assets which automatically spreads out your risk. And yes, they have the growth potential to build a large corpus for future financial security.