Mutual funds have been a very popular choice of investment for many decades. And with good reason, as they are affordable, easier, and more accessible investment option for people who are not that adept to risk it in the stock market. They say time is money.
So let’s not waste precious time and head right on to the multiple benefits of investing in mutual funds in India:
• Diversification: Asset diversification is basically mixing different investment options within a portfolio to minimize risks. However, diversification is often costly for an individual investor. A better option would be to invest in different mutual funds from different sectors of the economy for a truly diversified portfolio without the heavy costs.
• Divisibility: You do not need to have a whole lot of cash to invest in mutual funds. One benefit of mutual funds is that you can start investing with as low as 500 Rs. Smaller denominations of mutual funds allow you to make regular investments while taking advantage of averaging rupee-cost. This benefit ensures that even the smallest investor can make efforts to increase their profits.
• Liquidity: Mutual Funds enable you to redeem total or partial investments anytime you wish to. As compared to stocks, bonds, and deposits, mutual funds have a standardized process which allows you to get your money as soon as possible. However, it is important to watch out for any fees associated with selling, including back-end load fees.
• Tax benefits: To encourage more people to invest in mutual funds, the Indian Government offers various tax benefits to investors. If you invest for a year or more in capital gains, you are eligible for tax exemptions and deductions, depending on the kind of mutual fund it is.
• Professional fund management: Investing in a mutual fund also means choosing a professional fund manager. Professional fund managers have the skill and expertise to accurately analyse various funds and their companies. This manager will utilize your money to buy or sell stocks after thoroughly researching them, with the end goal of yielding higher returns for you.