Advantages and Benefits of investing in Mutual Funds in India

Mutual funds are one of the popular investment vehicles. Investing in them is a simple task, and you don’t need to be a market expert in investing in them. Mutual funds are a preferred investment option as they can generate higher returns than most of the other investment options. There are many different mutual fund benefits to the investors.

The mutual fund companies collect money from the investors and invest it in equities, debt or a mix of both. The mutual fund investors are allotted units of the scheme upon the purchase.

In this article, we list down some of the reasons that make them a wise investment option.

Benefits of Mutual Fund

  • Low Cost

The Asset Management Company (AMC) collects money from different investors and divide the cost among them. The exciting feature makes mutual funds a low-cost investment vehicle.

  • Professionally Managed

Professional fund managers manage your money and they are experts in their fields. They have intense knowledge of the financial markets and managing funds. The beginners who enter the market without any knowledge may invest in mutual funds because of the fund manager’s expertise. Professional management ensures the investors that their money is in safe hands and there is no need to worry. The experts are present at every step to guide the investors and build a healthy portfolio for them.

  • Multiple Options

Investing in mutual funds gives investors multiple options of selecting the mutual fund scheme as per their financial objectives. They can choose the funds based on the risk appetite and the duration they want to invest. If the purpose of investment is short-term, investors may opt to invest in short-term mutual fund schemes. Similarly, if they expect regular dividend flow, they may opt to invest in plans with a consistent record of paying dividends.

  • Diversification of Risk

Mutual funds invest in multiple assets like bonds, equity, debt, etc. That reduces the risk of investing in one sector or single stock or asset class. Mutual funds help investors diversify the portfolio by spreading the risk over various asset classes or stocks. There is no risk of losing the entire capital due to turbulent times in a particular sector or asset class with diversification.

  • Liquidity

Investors can easily buy and sell mutual funds as they offer high liquidity. Whenever they have an urgent need for funds, they can sell them. The money from the sale of the units is deposited in the bank account within few days. Some mutual funds provide instant redemption facilities where the investors can get cash in their bank accounts on the same day.

  • Tax Benefits

The tax benefits attached to different types of mutual fund schemes attract investors to this investment option. The Government of India encourages the investor to invest in mutual funds by giving them various tax benefits. For example, when investors invest in Equity-Linked Saving Schemes (ELSS) mutual funds, they are eligible for a tax deduction. 1,50,000 under sector 80C of the Income Tax Act, 1961.

  • Systematic Investment Plan (SIP) or Lumpsum Investment

The investors can invest in mutual fund schemes either through SIP or lumpsum. SIP is a Systematic Investment Plan in which investors can invest in mutual funds schemes in flexible instalments. By investing through SIP, the investors can become disciplined about their investment habits without much pressure on their finances. However, when an investor has huge funds in hand, he may opt for lumpsum investment, i.e. investing the whole amount in one go.

  • Low Investment

The mutual funds offer their investors a SIP facility to start investing in mutual fund units with an amount as low as Rs. 500. The instalments of SIP are payable either on a monthly, quarterly or semi-annual basis. Therefore, in mutual funds, investors do not need thousands of rupees to start their investment journey.

  • Well Regulated

The Securities and Exchange Board of India (SEBI) regulates mutual fund investments. All investments made by the asset management companies must be according to the SEBI’s guidelines. That ensures the investors against any unfair practice. Since SEBI does the monitoring of the mutual fund, these investments are safe and well regulated.

The above mentioned are some of the advantages of investing in mutual funds in India. Mutual funds are indeed one of the best investment options. They are easy to purchase and can generate significantly higher returns with lesser risk compared to most of the other asset classes. Before investing in mutual funds, it is advisable to thoroughly research and choose a scheme that meets your risk tolerance and financial objective.

Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100.  AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein mentioned are solely for informational and educational purpose.