Mutual funds are perfect for investors who are looking for professional management of their investments. Mutual funds usually offer a number of schemes and each scheme invests according to its investment objectives. Of late, mutual fund investments have become popular in India with several choosing this route to make investments.
Benefits of Mutual Funds
There are ample benefits of investing in mutual funds. These are explained in the below paragraphs
- Extensive growth potential
One of the major benefits of investing in mutual funds is its potential for extensive growth. Since mutual funds follow the route of collective investment that too in a specific group of companies, usually per industry, the growth potential is comparatively much higher than other forms of investments.
- Professional fund management
As mentioned earlier, mutual fund investments are managed by professional fund managers with expertise and experience. Every fund has a dedicated team of fund managers who work tirelessly to maximise the growth potential and offer you the best possible returns.
- Diversification of Portfolio
When you choose to invest in a mutual fund, a fund manager takes care of it. A expert they end up investing across different securities such as bond, equities, debts and so on. This wide range of investments allows diversification and diversification, the risks involved in investment gets countered. Even if one investment in the portfolio decreases in value, other investments may remain undeterred and may even increase the value. This is why portfolio diversification is one of the biggest advantages of a mutual fund.
- Low-cost and disciplined investment
Yet another benefit of investing in a mutual fund is its low-cost convenience. All of us have different needs and different financial objectives. With mutual funds you can start investing in small amounts – as low as Rs. 500 a month, thereby making it a suitable choice for investors coming from various economic backgrounds. If you do not have the discipline to invest regularly, opting for the systematic investment plan (SIP) route can help you to ensure discipline and thereby accumulate wealth over time.
- Aspect of liquidity
Most mutual fund investment is classified under liquid investment because most of them do not have any lock-in period except equity-linked savings schemes. An investor can choose to redeem a certain number of units or the total units as and when required Needless to say that this makes it much easier for investors to opt for mutual funds as your money also grows over time.
- Income tax benefits
Investors can reap income-tax benefits as well while investing in mutual fund schemes. When you invest in an equity-linked savings scheme, you can easily avail a deduction of up to Rs 1.5 lakh annually under Section 80C of the Income Tax Act, 1961. The icing on the cake is the fact that capital gains received on the mutual funds get a much lenient tax treatment.
On a final note, it can be said that, despite all its benefits mutual fund investments are subject to market risks. Hence it is always advisable to do your own research and then start with investments.