Advantages of Investing through Mutual Funds
For an investor mutual fund offer wide range of advantages. Some of the key advantages include:-
- Portfolio Diversification:- Mutual funds are a convenient and affordable way of gaining access to a wide range of investments that would be very difficult and time-consuming to purchase and manage individually. Because mutual funds typically hold 50 to 100 different investments, they offer a degree of diversification that would be difficult to achieve on your own.
- Professional management: Actively managed mutual funds also give you the benefit of professional investment management. The investments are selected by experienced professionals who devote themselves exclusively to tracking the markets, analyzing investments and implementing a consistent investment strategy.
- Flexibility to meet your needs and goals: A wide range of mutual funds are available to help meet the needs of every type of investor, from conservative to very aggressive. Mutual funds can also help you meet a variety of investment goals, from establishing an emergency fund to saving for a vacation, retirement or education.
- Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
- Return Potential: Over a medium to longterm, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
- Low Costs: Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.
- Liquidity: In open-ended schemes, you can get your money back promptly at Net Asset Value (NAV) related prices from the Mutual Fund itself. With close-ended schemes, you can sell your units on a stock exchange at the prevailing market price or avail of the facility of repurchase through Mutual Funds at NAV related prices which some close-ended and interval schemes offer you periodically.
- Transparency: You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager’s investment strategy and outlook.
- Flexibility: Through features such as Systematic Investment Plans (SIP), Systematic Withdrawal Plans (SWP) and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
- Choice of Schemes: Mutual Funds offer a variety of schemes to suit your varying needs over a lifetime.
- Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.