While there are various investment options available today (stocks, debts, etc), mutual funds are one of the more attractive ones to pick. They provide a variety of investment choices – thanks to debt funds, equity funds, liquid funds, tax-saving funds and more. Thanks to the internet, you can even identify the top mutual funds online from the comfort of your home. But that’s not all there is to take advantage of when investing in mutual funds. There is a whole host of incentives to investing in mutual funds over any other investment option. Let’s take a closer look.
#1: Professional Management
An investment involves a combination of decisions that require a deep understanding of the economic market, financial opportunities, returns of investment and more. However, in the case of mutual funds, most of these decisions are taken by professional fund managers. Their day job involves tracking the economic and financial markets and managing multiple investments. These managers are trained to identify the winning stocks and buy and sell them at the right times. They spend hours analyzing company performances and align their portfolio accordingly. In mutual funds, you can leave a large part of your investment analysis and research to these professional managers, who can invest your funds wisely and deliver high returns of investment, taking the burden off your shoulders.
#2: Higher returns for every investor
Every investor naturally seeks higher investment returns. Mutual funds provide the right avenues for their clients to invest in a variety of market-linked instruments which regularly deliver superior returns with minimal efforts and expense. For instance, debt funds have proven to be presented as an excellent investment choice for investors with lower risk appetites. On the other hand, equity shares have shown adventurous investors high-inflation beating returns. Mutual funds provide head-starts to all types of investors.
#3: Investments in small amounts
Allowing fractional investors in large assets, mutual funds allow investments in small amounts. This works extremely well for large ticket investments like that of the real estates. While there exists a minimum investment for properties (which are in lakhs), real estate mutual funds allow investments of a few thousand rupees, which is profitable when invested in large projects.
Mutual funds provide the advantages of diversification by default. Diversification is the process of spreading your investments across multiple assets and securities to overcome risks. In order to balance out the performance of different items in your portfolio (and to guard against volatility), fund managers in mutual funds create a portfolio consisting of different varieties of stocks. As an individual investor, it is also important for you to diversify across mutual funds, after having researched based on advice, advantages, benefits, higher returns, goals, etc.
#5: Easy and simple processes of investments
Thanks to the internet, investing in mutual funds is extremely easy, simple and convenient. The entire process is offered online by most players in the industry. Setting up a profile, connecting bank accounts, linking documents, investments and its tracking can all be done within a matter of a few clicks. There are portals which allow investment through many intermediaries, as well as a direct investment with mutual fund companies.
#6: Easy and immediate access to money
Unlike traditional investing methods that come along with long-term money lock-ins, most mutual funds come with no or short-term lock-in periods. Funds invested in a mutual fund can easily be withdrawn at any point in time. After a request, your funds are automatically put into the clients’ bank account within 3-4 working days.
#7: Tax efficiency
In most cases, investments in mutual funds lead to better tax efficiency. Tax efficient mutual funds are designed and structured specifically to reduce tax liabilities while maintaining the higher return rates mutual funds are known to provide. For instance, an investment in Gold ETFs is more tax efficient than a direct investment in gold itself.
#8: Disciplined and safe investments
Fund managers in mutual funds usually invest in assets that are periodically audited, which generally ensures a certain amount of safety to your investments. Moreover, mutual funds offer SIPs (Systematic Investment Plan) option that can commit the client to investing a certain amount of funds consistently, ensuring a disciplined and a secured future.
#9: SEBI Regulatory oversight
Market regulator SEBI (Securities and Exchange Board of India) generally imposes strict rules, regulations and guidelines for all mutual fund companies to protect the investors in the market. SEBI has been known to consistently work on steps to benefit all investors, ensuring safety and security whilst providing a balance to how the market operates.
Mutual funds have plenty of advantages to offer to investors depending on their preferences, financial goals and more. Given their generally low volatility and risk levels (as compared to say, direct investments in equities), they have the potential to not only provide greater returns but also make the investment process simple and convenient.