What are Mutual Funds? 6 Reasons You Should Invest in Them

Over the past decade, mutual funds have become a household term but not many know what they actually are and how beneficial they can be in terms of your investment choices. Contrary to popular belief, investing in mutual funds is a much safer option than investing in actual stocks. 

It is an excellent way to invest in the stock market especially for beginners and if you don’t want to spend time evaluating and understanding your options. 

With mutual funds, your money is pooled in with multiple investors and then managed professionally which makes the portfolio diversified. The income generated from these investments is then accordingly distributed among all the investors. 

Like any investment plan, mutual funds are also subject to market risks, however, these risks are considerably lower as compared to other avenues and can also generally garner greater returns than most plans.

Over the past decade, mutual funds have become a household term but not many know what they actually are and how beneficial they can be in terms of your investment choices. It is an excellent way to invest in the stock market especially for beginners and if you don’t want to spend time evaluating and understanding your options. 

With mutual funds, your money is pooled in with multiple investors and then managed professionally which makes the portfolio diversified. The income generated from these investments is then accordingly distributed among all the investors. Like any investment plan, mutual funds are also subject to market risks, however, these risks are considerably lower as compared to other avenues and can also generally garner greater returns than most plans.

Investing in mutual funds can have multiple benefits. Here’s a look at the top 6 advantages:

1. Professional Management

One of the biggest advantages of investing in mutual funds is that they are professionally managed by Asset Management Companies (AMCs). Investing in stocks requires a deep understanding of the market and economic trends. With a team of expert fund managers, you can rest assured that your investments are chosen, analyzed, and monitored competently for much safer money management without the perpetual stress of understanding market swings. 

2. Diversification

Investing in mutual funds ensures that you don’t put all your eggs in one basket. Securing an effective & risk-reduced way of getting returns gives you the freedom to spread your capital in multiple stocks and sectors. With diversification, you can reduce your risk by investing in more than one option, so that if one opportunity doesn’t do well, you have others to make up for it.

3. Ease of Affordability:

Mutual funds are extremely affordable and give you the ease of choosing the amount that you can shell out to invest. You can start off with as little as Rs. 100 per month in Systematic Investment Plans (SIPs) in some cases and still benefit from them being a fractional investor in large assets. The flexibility to invest in smaller amounts regularly, works especially great for salaried individuals looking to systematically build a corpus.

4. Easy Access to your Money:

The level of liquidity available with Mutual Fund investments can be extremely beneficial in case of financial emergencies. In just a few taps, you can pull out your money from the fund and get it credited into your bank account in less than 4 days in most cases.

5. Tax Benefits:

Another crucial benefit of mutual funds is that you can avail tax benefits in certain cases. ELSS mutual funds offer a tax exemption of up to 1.5 lakhs under Section 80C of the Income Tax Act. They have the potential to deliver higher returns than most tax saving options in India.

Other than ELSS, all other types of mutual funds are taxable under the Income Tax Act, depending on the tenure and the type of fund.

6. Optimum Safety & Transparency:

Mutual funds are regulated by the Securities and Exchange Board of India (SEBI) that mandates all mutual funds be subject to regular audits and disclose their portfolios every month. This makes the Mutual Funds an extremely foolproof & safe way of investment.

In today’s day and age, financial security is significant and mutual funds are one such investment avenue that offer superior returns in the long term. Sure, like most other investment options, mutual funds also have their share of risks, however, with the right portfolio there can be more gains.

Interested in having your capital invested in the best possible mutual funds? Get in touch with us to know more.