An investment is always expected to give profits. All that you as an investor will expect is a return or profit. Similarly, market-linked returns are one of the benefits of mutual funds, and there are others worth noting too. 

 

Thanks to digitisation, starting your investing journey is a lot easier today, and can be done through your smartphone. This makes it easier to enjoy the advantages and benefits of investing in mutual funds that have attracted investors across the globe.

Access to Professional Fund Managers

  • Researching for investing purposes is a challenging task. It isn’t enough to simply compare the YoY returns or other metrics that serve as markers of growth or decline.

  • Enjoy the benefit of professional management with your funds managed by an expert. These professionals usually have decades of experience to their name, and have a proven track record in investing. 

  • Whatever the fund you choose, you can check the fund manager for it, and learn about their past experience and performance. Access to such experts is a very useful benefit, especially when investing in market-linked instruments.

  • The diversification in mutual funds alone seems overwhelming but these experts can be trusted to manage your investment.

Ample Liquidity

  • An investment in mutual funds is beneficial over many other options simply because it does away with the worry of losing access to your money.

  • The liquidity in mutual funds can be very high depending on the type. Also, this means that you can access your capital, whenever you need it. There are no delays, and you need only redeem your units to get the value that they are worth. 

  • Fund managers or their associates can assist and help you decide if liquidating your entire position is the right option.  

Multiple Investment Modes 

  • Investing in mutual funds is flexible and you can get started in more than one way, making this instrument beneficial for all investor profiles. For some, larger lump sums may be a preferred mode, and this is possible with mutual funds. 

  • Alternatively, there are systematic investing options too, wherein you can contribute and build your portfolio through regular payments. One among these is the Systematic Investment Plan (SIP), and it is arguably the most commonly known one too. 

  • Investment through SIP can help you capitalise on market shifts efficiently. Based on the fund, you can start investing with as low as ₹100/month.

Taxation Perks and Savings

  • The most notable tax benefit is with the Equity-Linked Saving Schemes (ELSS). It is the only instrument that offers a direct rebate on the investment, but there are terms in place. For one, the benefit falls under Section 80C, and only investments up to ₹1.5 Lakhs every year are exempt. 

  • While there is no cap on the amount you can invest in the ELSS option, amounts only up to ₹1.5 Lakh are eligible for tax benefits. Do note that ELSS also has a lock-in period of 3 years.

Market-linked Returns

  • When it comes to pure growth and absolute returns, mutual funds are among the top options to consider. The assets invested in are linked to the market, and you can diversify your portfolio to truly capitalise on all sectors.

  • Mutual funds also allow you to invest across different sectors, and provide you with the option to stay invested for longer horizons. So, for booming industries, getting in early and riding out the market can be a great way to grow your wealth.

Simplified Investment Provisions

  • Modern technologies have simplified many things, investing included. Today, you can invest in mutual funds in just a few clicks through apps and dedicated investing platforms.

  • Banks often have such options integrated into their mobile banking solutions, making them a lot more accessible. 

  • Another benefit of these provisions is real-time monitoring of your investment. Diversified mutual funds can be difficult to track manually, but these tools simplify this as well.

Portfolio Diversification

  • Mutual funds offer choice, and this helps you diversify efficiently. This is because mutual funds invest in various types of securities like equity, debt, hybrid, gold, etc. Effectively, you can create a balanced portfolio according to your risk appetite. 

  • Moreover, it helps offset losses, especially if certain asset classes or sectors are facing a downturn. As a result, fluctuations have a reduced effect on your portfolio, and you can absorb losses more efficiently.

Higher Convenience and Accessibility

  • Yet another benefit of investing in mutual funds is the high accessibility and convenience.

  • You can invest in mutual funds easily through online as well as offline modes. There are various channels through which asset management companies, or AMCs, allow you to invest. 

  • To apply online, you simply need to visit the official website of the AMC, bank, or any online platform. Choose a mutual fund scheme and submit the necessary paperwork to start the journey hassle-free.

  • If you prefer applying through the offline mode, visit the AMC’s branch and provide the necessary documents in person.

Adequate Transparency

  • Investing in mutual funds comes with adequate safety measures since mutual funds are regulated by the Securities and Exchange Board of India (SEBI). There are various rules and regulations set by SEBI that aim to protect the investor. 

  • There are set risk mitigation frameworks, and these facilitate transparency and fair valuation. Additionally, all mutual funds schemes are identifiable by their risk profiles. This way, you can understand the risk and choose an option that aligns with your risk appetite and preferences. 

  • There are 3 colours that indicate different levels of risk:

    1. Blue means low risk level

    2. Yellow means medium risk level

    3. Brown means high risk level

Flexible Lock-in Periods

  • Certain mutual fund investments such as the ELSS come with a lock-in period. Typically, these investments have a lock-in period of 3 years only.

  • In general, mutual funds have no lower lock-in periods as compared to other investment avenues such as tax-saving FDs, PPFs, and ULIPs among others.

 

The benefits of investing in mutual funds can be experienced by all types of investors, and it boils down to picking the right mix. Diversification is key for any portfolio, and mutual funds make it easy to invest in various parts of the market. 


For investment options across a wide spectrum, check out your options on Bajaj Markets. Invest in mutual funds of your choice, and choose other instruments as well, if you wish to take a more conservative route.

FAQs

What are mutual funds and how do they manage risks?

Mutual funds are an instrument wherein investor funds are pooled together and invested in a specific asset class or commodity. For instance, two of the more common types of mutual funds include equity or debt-oriented mutual funds.

 

Naturally, these funds are linked to the market and there are risks involved. These risks are managed by expert fund managers, who invest in a balanced mix of assets, based on the fund’s objective.

What benefits do mutual funds offer besides diversification?

Mutual funds are managed by professional fund managers, they are highly liquid, allow you to invest via systematic investment modes such as the SIP, and offer market-linked returns.

How do mutual funds provide professional management and diversification?

Mutual funds are managed by professionals and are built to provide the opportunity to generate returns. When it comes to diversification, you can choose various types of funds, and even opt for balanced funds, which invest in a mixed bag of asset classes.

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