Mutual fund investments are preferred over all other types of investment. These investments are very convenient to rely on as they are pooled in and merged to make huge funds which are later invested and managed by experts. The investors can derive many benefits by going in for such investments. Here we enlist five important attributes of the mutual funds which justify being the good odd reasons for investors to park their money into.
1. Experts available to manage your funds: In mutual fund schemes, the fund manager make a large pool of money collected from different individuals who want to invest. These funds are then invested in diversified assets, sectors/or industries. The Fund managers before investing in any company, first analyze the company basic information and then its financial and future prospects critically. Such information is available to them in due time. With the help of this, they are able to identify the best opportunities available that can maximize your returns.
2. Low investment values: Generally if you want to go for a balanced and well diversified portfolio, then you need to have larg initial amount to be invested. However, this is not possible for all individuals who can afford only small part of savings towards such investments. Mutual funds come as a relief for such people.
3. Diversification allows mitigation of risks: The risks of the investments get reduced as the funds go into multiple avenues. They are converted into units and you own the units, whose value is determined on the basis of the net asset value. This is so as the investments are done across multiple asset classes like equity, debt, hybrid etc which mitigate the overall risk of the fund.
4. Tax benefits: Some schemes under mutual funds are eligible for tax exemption under the section 80C per the Income tax Act, for instance the equity linked savings scheme. Moreover, the profits earned in the form of dividends by the mutual funds are not taxable at all.
5. Low costs: As the amount of money the mutual fund managers handle is quite big, they already achieve economies of scale. In this way, the transactional fees, fund management fees all get lowered for the investors. This is definitely very beneficial for the investors.
Besides, technology has made investments and tracking the same very easy. You can simply log in from your home or workplace and take the updates, understand the daily NAV or the net asset value of your investments. There are different types of mutual funds available in the market. Go for the open ended ones to avail more benefits in terms of transacting often. Otherwise, there is a preliminary lock-in period until which your funds remain blocked. If you have not yet made any investment in mutual funds, then it is high time to go for the same.
About the Author
Rajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.Follow @SanaSecurities