Mutual funds are among the most popular investment options among the various investment options available in the market. These mutual funds are managed by the asset management company that hires financial professionals to manage the mutual funds. As the funds are professionally managed, they provide the investors with an added sense of security. Investing through mutual funds have other benefits as well, like:
Mutual funds mainly consists of two classes- Debt and Equity. Some funds purely invest in debt, while others just in equity, and few others could be balanced or hybrid in nature. The main benefit of investing in a mutual fund is that you benefit from the variety in terms of shares or fixed income instruments. For example, if you invest Rs. 2,000 in stocks directly, you would probably get only a share or two. On the other hand, if you make investments through mutual funds, you would get a basket of several stocks for the same amount.
Lumpsum or SIPs
Mutual Funds provide a unique feature of flexibility. You can make a lump sum investment, and you can also make small investments over time through SIP (Systematic Investment Plan). Investors are recommended to invest through SIPs as it involves smaller investments (compared to Lump Sump). Also, the rupee cost averaging for acquiring mutual fund units can be lower.
There\’s a Fund for Everyone
This is one of the most essential benefits of mutual funds. There are over 2,000 active schemes currently. Therefore, you have a lot to choose from. You can find funds that match your risk zest, investment needs, and your financial goals. Debt funds are the least risky of them all, balanced or hybrid funds are relatively risky, and equity funds involve the highest amount of risk. Although, the reward is directly proportional to risk. Higher the risk, the higher the returns.
You can Invest in Small Amounts
Mutual Funds allow you to invest small amounts over a period of time. You can begin with SIP by investing as little as Rs. 500/ month. This reduces the need of investing only the accumulated cash to make investments. Thereby enabling you to optimize your cash-in-hand and returns thereof.
Mutual funds work effectively and efficiently for you, unlike other investing tools available in the market. As it\’s professionally handled, you can clearly estimate your risk, return with them, and plan your investments accordingly. It is also an excellent option for wealth maximization and can help create the said wealth through compounding interests.