Since the inception of mutual funds, mutual funds have been a popular investment option for investors. The simplicity of understanding and the features provides great benefits to the investors with limited knowledge, money and time. Let us see what are the benefits of investing in mutual funds.
The main benefit of investing in mutual funds is asset diversification. For example, an investor can buy stocks in the retail sector and then buy some other stocks in the industrial sector at the same time. This will help them to reduce the impact of market fluctuations and save the losses on the portfolio. Buying them can be a costly affair. Other mutual fund benefits are instant diversification and asset allocation without having to pay too much. Debt funds allow you to invest in debt instruments such as bank FDs, money market instruments, and government/corporate bonds. And then there are balanced mutual funds which offer you exposure to both equities and debt instruments.
Many investors cannot buy a lot of stocks with the money they have especially after deducting commission. But, with mutual funds, investors can buy in smaller denominations. This, in turn, will help them make periodic investments through monthly plans when taking advantage of dollar cost averaging. So, rather than wait for the money accumulate, you can invest in mutual funds.
Another major advantage of mutual funds is the ability to get in and out without hassle. The investor can sell their mutual funds in a short period of time without having much difference between sale price and current market value.
Mutual funds do not eat away a large chunk of your money. For example, when you buy 1 piece of apple, the cost will be less when a dozen of apples is bought together. This also happens in the buy and sale of securities. If you buy one security at a time, the cost will be high. But, equity mutual funds are able to take advantage of the buying and selling size and helps to reduce the transaction cost.
If the benefits are not convincing, take a look at the Advantages of mutual funds.
Investing requires financial know-how and skills. It requires a constant study of the markets and various industries and companies. To be a successful investor, you need someone professional to manage your money. In India, the fund managers are acquiring global certificates like CFA, MBA which provides them with cutting edge knowledge of the investing world.
If you have a bank account and a PAN number, you can start investing right away. Since all the funds are well integrated with the system, the money will arrive at your bank account. This is a major advantage of investing in mutual funds.
You have to fill up a form attach a copy of your PAN and sign a cheque to start investing. In the top 8-10 cities of India, there are many collection points and distributors which make it easy to send the application.
Regulated by SEBI
Indian mutual funds are well regulated by the Securities Exchange Board of India (SEBI). This streamlines the process of how mutual funds work in different AMCs as the institute monitors the transactions and maintains transparency on the mutual funds. This helps to make the investor an informed choice. You can keep track of all the investment and the transactions made on the money.
Also, besides, the above-mentioned advantage of mutual funds you can enjoy tax benefits by investing in ELSS funds. The more time your money is invested in mutual funds, the more advantage you enjoy.
So what are you waiting for? Go ahead, invest!