Mutual funds are the ideal investment choices for investors who do not directly want to invest in the capital market. As an investor, you can easily find a mutual fund investment option that suits your investment goals, income, risk appetite and returns expectation. Before you understand the various mutual fund options available and how to invest in it, it is essential to know the benefits of investing in mutual funds

Following are the top 10 benefits of investing in mutual funds

1) Easy to understand

Mutual funds are investment options with a simple structure that every investor can understand. To invest in a mutual fund and become successful, you don’t need to have experience, expertise and complete knowledge of financial markets. Investing in mutual funds and redeeming them is incredibly easy which requires no market expertise.

2) Professional management

Mutual funds are managed by a team of experts. Each mutual fund scheme is managed by fund managers who take care of building a fund’s portfolio, buying, selling and managing full time using their market expertise. Fund managers also constantly do extensive research and analyse the financial market while taking buy/sell decisions in order to protect your wealth. You can simply start investing in mutual funds without mastering in finance as a growth and performance of your mutual fund investment will be professionally managed and monitored by fund managers.

3) Easily accessible

Mutual funds are easily accessible through mutual fund companies, banks, brokerage firms, online brokers and insurance companies. With the online process of buying, you can invest in mutual funds without any hassles online.

 

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4) Offers diversification

Diversification of risk is one of the biggest benefits offered by mutual fund investments. As mutual funds invest in various securities, there are a variety of risks involved such as market risk, credit risk and interest rate risk etc. However, in mutual funds, you make indirect investments into the financial market instead of directly investing along with other like-minded investors. Fund managers invest in a variety of stocks and securities in a mutual fund portfolio, your investment risk is diversified across different sectors. When compared with stocks, mutual fund investments are more diversified.

5) Cost-effective

Expenses or cost involved in managing an actively managed mutual fund portfolio is relatively lower than the cost of managing a portfolio of individual securities. When you invest in mutual funds, you will have to incur fund management charges of up to 2.50%. Some of the mutual funds that come with predefined time frames may have some exit load which you need to incur if you redeem before the predefined time frame of the investment. However, the cost involved is lower when you compare it with the transaction cost and brokerage involved in regular stock investing.

6)Smaller capital outlay

When it comes to stocks, you need to have a large corpus to create a diversified portfolio of individual stocks. On the other hand, in mutual fund investment, you can own a diversified portfolio of securities with even a smaller capital outlay as mutual fund work on pooling of money. When you are investing a lump sum in mutual funds, you can even start with INR. 5,000. When you are investing in mutual funds in a disciplined way i.e. a systematic investment plan, you can start with as small as INR 500 monthly.

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7) Product variety

There are a variety of mutual fund schemes available that come with varying risk-return characteristics to suit your varying needs. You can choose a mutual fund scheme that is suitable for risk profile, time horizon and investment objective. For example, there are monthly income plans in mutual funds which addresses your regular income requirement at minimal risk involved.

8) Flexible investing

Mutual fund investment offers you many flexible investing options such as lump sum investment, systematic investment plan, systematic withdrawal plan and dividend reinvestment etc. Many mutual funds do not come with predefined time frame which offers you the flexibility to redeem anytime to meet urgent liquidity requirements.

9) Well regulated

Mutual funds in India are well regulated by well-known regulatory bodies like Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds in India (AMFI). Every mutual fund trust needs to be registered with the Securities and Exchange Board of India (SEBI) and the guidelines are given by the SEBI needs to be followed by the mutual fund companies.

10) Transparency

Mutual funds offer you transparency by disclosing every detail related to a mutual fund scheme fact sheet. Monthly factsheets of mutual funds help you keep a tab on all your mutual fund investments.

A mutual fund is a smart investment option that is easy to understand, convenient and offers you various amazing benefits. With professional management advantage, you can start investing systematically in mutual funds. You can choose the investment option, fund type that is suitable based on your risk appetite and investment objective.

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