Mutual funds are emerging as an attractive investment choice for a wide range of investors in India! Apparently, the investment class has a lot to offer! Let’s take a look at the main reasons for this rising trend.
Wondering why mutual funds are becoming an essential constituent of an investor’s portfolio? Why are more and more people taking this investment route rather than opting for bonds, gold or traditional fixed deposits? Well, there are plenty of reasons!
For starters, the asset class is a versatile and reasonably secure mode of investment that has schemes/products for everybody. Not to mention, mutual funds promise good returns, provide easy liquidity, diversification opportunities and are ultra-flexible. Moreover, they are an excellent way to build a good corpus for achieving long term financial objectives. Here are five reasons why mutual funds are regarded as a smart investment tool.
- Professionally Managed Funds by Experts: Don’t have the experience, know-how or the time to manage your investments? No worries! Mutual funds are handled by professional managers with proficiency in the domain. The experts perform thorough research, in-depth analysis, and study market trends carefully to identify schemes that can generate higher returns.
- Opportunities for Well-Diversified Portfolio: The famous adage “don’t put all your eggs in one basket” applies to investment too! Financial gurus stress the need for diversification which means spreading money across multiple asset classes to lower the risk factor. Diversification can be achieved by investing in different types of mutual funds. A well-balanced portfolio gives the investor an edge in the face of sudden volatility in the market. If one sector is hit, the impact is offset by the performance of other stocks in the fund.
- Suitable for both Smalland Big Investment:Many investors do not have enough money to buy blue chip stock. It may take years for the layman to accumulate money for high-cost holdings. Mutual funds are an ideal choice. Investments can be started right away with small denominations. For example, a Systematic Investment Plan (SIP) come with a minimum as low as Rs.500 a month. Not just small investments, Mutual Funds are ideal for making big investments too.
- Flexibility to Redeem Money: Most of the investment instruments have fixed long lock-in periods. In contrast, mutual funds come with less or no lock-in period. Even the tax-saving Equity Linked Savings Schemes (ELSS) has a short lock-in of only three years. As a result, an investor can get in and out with ease. The flexibility to sell his holding anytime provides quick access to money in the event of a financial emergency. Experts, nonetheless advise long term investment to enjoy higher returns.
- Simple & Convenient Mode of Investment: Thanks to advancements in the technological field, investing in mutual funds have become very simple and convenient. Everything from starting investment to monitoring its performance is just a click away. What’s more by setting SIPs on automatic payment mode, the money gets pulled directly every month from the investors account to the selected fund. That’s not all! Portfolio details and account statements can be accessed online. And yes, all mutual funds are monitored by SEBI and hence they are secure and transparent.
To wrap up, mutual funds in India are the perfect investment vehicle for most people to meet their financial goals. It is a low-cost investment avenue that is easy to understand, professionally managed and offers advantages like diversification, systematic investment planning, and liquidity. In short, the investment program has the potential to help generate good returns over the years with minimal effort.