Know About the benefits of Mutual Funds before Investing

We might be aware of the common benefits of mutual funds. But there are a few advantages that are not known by the general public. Prior to investing in mutual funds, it is crucial that one is fully aware of the benefits and risks involved. This allows you to extract maximum gain from an investment. Below is the list that mentions all the possible benefits offered by mutual funds to the investors:

Smart Investment option

If one invests all his money in the investment tool that invests in a specific sector, the risk of losing money in a go increases. There is a chance that one might lose all his money if the industry he invested in fails. But this can be avoided if you invest in mutual funds. Mutual fund scheme distributes your investment into various assets which reduce the associated risk. Thus, if one sector is in loss the other sector’s gain can recompense the amount lost. Mutual funds are a smarter way to invest due to the risk mitigation benefit in comparison to other investments.

Low-cost investment

An interesting feature of mutual funds, low-cost investment is when mutual funds get cash from different investors, the advantage the asset management services given by the organization come at a relatively minimal effort or charge since the sum is similarly separated between every one of the investors.

Well-regulated funds

The Securities and Exchange Board of India (SEBI) regulates the mutual fund investments. There are certain rules and regulations set by SEBI which are followed by all the mutual fund providers in the country. All the investments made under mutual funds are according to the guidelines laid down by SEBI. This makes it certain that there is no unfair treatment towards either investor or provider. The money invested under mutual funds is safe and well-regulated as it is under the supervision of an authorized body such as SEBI.

Professionally managed

It is easy to invest in mutual funds. Controlled and managed by expert fund managers who have ample experience in this field. Thus, with the help of an experienced manager, an amateur who has no idea about the market can invest in mutual funds. Your money is invested in safe places as expert professionals manage all the activities. They look after your investments, create a portfolio, invest money strategically and guide you at every step of investment.

Multiple investment options

An investor has various options while investing in mutual funds. They can choose funds according to the objective of their investment and pick funds as per the number of returns they want. For instance, if one wishes to gain returns in a short period, then they’d invest in short-term funds. For a secured future and future expenses to meet, it is ideal to invest in long-term funds. In mutual funds, if you wish to have a regular income flow throughout the term, you can opt for dividend payout facility. If your goal is to increase the capital throughout the term, you can go for the growth option and if you wish to earn a regular income, you can choose the dividend facility.

Lump sum investment or in installments

Even if you don’t have a large amount to invest in one time, you can still invest in mutual funds. For example, if you are young or you don’t have a large sum of money to invest in one shot, you can still invest by choosing the option of SIP investment option. SIP stands for Systematic Investment Plan that permits the investor to invest in easy installments (EMIs). By investing in a SIP plan, there won’t be a burden on your finances. On the other hand, you can invest a lump sum amount if you have a large amount.

Low investments requirement

In the SIP investment option, the investor can start investing in mutual funds with as little as Rs. 500 per month. Systematic Investment Plan (SIP) doesn’t ask you to invest large amounts in the mutual funds at one shot. Instead, you can start investing with a minimum amount of Rs. 500 for a SIP. With time, if you wish to increase the investment or have a lump sum amount, you can invest more money in the fund.

Diversification of risk

The risk associated with mutual funds can be diversified since mutual funds are subjected to market risks. It is completely up to the investor to decide how much risk he/she is willing to take. Although the high-risk funds offer higher returns, the stakes of losing are equally high. Thus, if you do not wish to take a risk, you can choose either low or medium risk funds. In medium-risk, you can gain medium return while in a low-risk fund the risk is low and the returns are lowest. Thus, you can diversify the risk based on your risk taking ability and by choosing suitable funds that match your requirements.

Growth-oriented investment

The investors benefit from the growing Indian economy as most of the mutual funds invest in the growth-oriented equity market. The chances of returns generated from investments in equity and equity-related securities of companies are considerably high although they are prone to certain risks. The investors can conduct their individual research of fund invested in the stocks and bonds of high-grade companies without any involvement of the intermediary.

Equity liquidity options

An investor gets the option for liquidation of the units while making an investment in mutual funds. The investor has the flexibility to select either regular funds or tax saving funds. That’s because they vary from each other in terms of liquidity. In a regular plan, an investor can liquidate income after a few months from making the investment. While in tax saver fund, the principal capital, and the dividend can be withdrawn only once the 3-year lock-in period ends. One can plan future finances in a better way as a result of the higher lock-in period in a tax-saving scheme. This will result in generating high capital growth at the end of the investment term.

Ease of purchase and redemption

The mutual fund scheme offers units that can be purchased and redeemed with ease on all working days at the pertinent NAV prices. The units of the open-ended mutual funds can be purchased or redeemed on any working day except for the mutual funds that are locked for a particular duration of time, such as ELSS. The investors have easy access to their money since there are no restrictions on the redemption/ liquidation of the units.

The flexibility of switching funds

The investors have an option to switch between schemes or funds in order to avail better returns or better terms with respect to your investment. However, fund switching option is available among the same fund schemes and not between the funds provided by a company.

Easy to track funds

To track and regularly review the mutual funds an investment portfolio is not an easy task. The fund units are purchased and liquidated on a regular basis by the subscribers. The mutual fund companies offer clear statements of all the investments made by the investor which makes it easy to keep a track. The executive can provide you with the statements or you can directly download it from the official website of the fund house.

Tax saving advantages

One major advantage of investing in mutual funds is tax saving benefits to investors. By investing money in equity-linked savings schemes (ELSS), the investor becomes eligible to get benefits such as tax deduction under Section 80C of the Income Tax Act, 1961. Tax deduction benefits up to Rs. 15,000 is allowed to a mutual fund investor as per the Income Tax Act. Hence, after you invest in such tax-saving schemes, you get the benefit of not paying income tax for the amount that you have invested with an investment firm. This means that such investments can decrease taxable income.

Thus, we have listed some of the advantages if you plan to invest in Mutual Funds. Investing in Mutual Funds is a better option as the benefits are unique and one gains high interest with much lesser risk. One must scrutinize the market, invest in funds that are suitable for your needs and hire an expert to guide you through as mutual funds are subject to market risks.

We at PTIC are willing to help people organize their wealth and design a financial plan that will generate the best possible returns. We assist people to invest in various mutual fund schemes that provide benefit to the investment. Our teams of expert financial planners are always available to guide you through the process throughout the investment term. The executives offer you with all the information regarding your investment plans. Our main aim is to guide you so that your investments can generate high returns.