Benefits of Investing in a Mutual Fund
Mutual funds can be broadly categorized into 8 classifications based on their asset class – equity funds, debt funds, money market funds, balanced funds, fund of funds, sector funds, index funds and ELSS tax-saving funds. Let’s discuss mutual fund categories based on their asset class:
Expert Asset Management
One of the prime benefits of mutual fund investments is that there are expert professionals to guide you as per your financial objectives. Seasoned investors may prefer monitoring mutual fund performances and investing in those that are aligned to their goals. However, others who do not have an in-depth knowledge about mutual funds, would require assistance in selecting the right combination of assets. More importantly, several factors have to be assessed to time them right while building a robust portfolio that generates healthy returns that meet your unique requirements.Asset Management Companies (AMCs) help mutual fund investors with just that.
Portfolio should diversify its assets in multiple shares and stocks across market caps and sectors to maintain a balance and avert unnecessary capital market risks. This will ensure that when a mutual fund underperforms, there will be other mutual funds in the portfolio that will not only keep your investments safe but also enable growth.
There are a range of cost-effective mutual fund options, making them suitable for youngsters as well. You can explore the option of investing in a SIP for an amount as small as Rs. 500 a month. Acting as an effective investment-cum-saving scheme, it inculcates a disciplined habit for savings by encouraging investors to keep aside a certain amount from their monthly income. This develops their foresight, enabling them to be plan for their future aspirations and also to be financially prepared for unforeseen emergencies.
SIP is a Systematic Investment Plan. This plan helps the investor to invest the money in instalments for a period of time in mutual funds. SIP takes the burden out of the investor to make lump sum money available in one shot.
Varied asset class
Investments – equity funds, debt funds, money market funds and balanced funds – are classified based on the varied objectives and risk appetites of investors. Equity funds are the best suited for mutual fund investors aiming to achieve high returns through short term investments. On the other hand, balanced mutual funds invest in a combination of money market instruments and debt funds to maintain stability in the mutual fund portfolio while aiming for growth. The returns are healthy, though not as high as that of equity funds.
Versatile investment options
This offers investors the flexibility to select from a wide range of assets of companies across sizes and sectors, as per the risk appetites of investors.While certain mutual funds invest in multiple business sectors, some others specialize in investing in assets of companies of a specific sector. Similarly, there are mutual funds that invest in assets of companies of large cap or mid cap or small cap, including start-ups, while a few others invest in a combination of these. For instance, equity funds generally invest in the assets of companies specializing in retail, across market caps.
Equity Linked Savings Scheme or ELSS investors can enjoy tax exemptions of up to Rs. 1.50 lakh under Section 80C of the Income Tax Act, 1961.
Healthy growth and returns
Different mutual funds in India offer varied growth rates, depending on various parameters like the tenure of investments. For example, equity mutual funds ensure high returns over a short term for investors with a high risk appetite.
All investments in India are regulated by SEBI, Securities Exchange Board of India- (Mutual Fund) Regulations 1996, emphasizing on the reliability of such investments in the country. Seamless purchase, repurchase and
Today, it is easy to purchase mutual funds and also redeem the invested funds online. The whole process can be done online by logging in to the online portal of the fund house you have invested in by yourself.
Easy online accessibility
Digitalization has brought the world together, making products and services readily accessible across the globe at the click of a few buttons. It is no different for mutual fund investments with leading banks, non-banking financial institutions and AMCs offering mutual fund investments through their official websites. This has made it easier for investors to browse through mutual fund options, compare and analyse them and then make a conscious decision. Not just during the purchasing process, fund performance can be tracked, repurchased and also redeemed online. The online platform has streamlined these processes. This has not only introduced seamlessness in the investments, but also proved to be a time-saver.