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Why should you invest in mutual funds?

Siddhi Sharma
/ Categories: Mutual Fund
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Why should you invest in mutual funds?

Mutual Fund offers following benefits:

Mutual funds are professionally managed: Mutual funds are being managed by professionals, who are better-equipped and trained to manage money. They will help you to diversify your money among various instruments and try to provide you with a capital gain or returns to the investor at a lower cost.  

Diversification: Diversification is key to reduce your risk. As it’s said, “don’t put all your eggs in one basket”. Similarly, investment in one industry or a particular stock shouldn’t be done. Diversification mitigates the unsystematic risk (unsystematic risk is the risk unique to a specific company or industry).  

Mutual funds provide ease in investing: When an individual decides to invest, the first question that arises in the mind is, where to invest? As there are a lot of investment instruments available out there in the market such as equity stocks, bonds, government securities, money market instruments, etc, it can be overwhelming for an investor to choose between these investment options. Thus, an investor has the option to invest his money in all of these investments via mutual funds. Mutual funds pool money together from a group of investors and invest the capital into various securities, which makes your portfolio diversified. Fund managers invest in well-researched instruments, which are fundamentally strong thereby, leading to an increase in the efficiency of your investment to grow with time.  

Mutual funds offer systematic investing: In a mutual fund, you can invest with even small amounts. You can invest your money every month, which will give you the benefit of rupee cost averaging.  

Mutual funds offer liquidity: If you need your money invested, you can withdraw money as and when required. As compared to other asset classes such as real estate, the mutual fund provides higher liquidity.  

Mutual funds offer tax benefits: Saving your Income Tax is one of the benefits that you enjoy. By investing in an ELSS fund, you get tax benefit u/s 80C up to Rs 1.5 lakh.

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