In the world of investments and stock markets, mutual funds turn out to be a long-established and trusted option by prospective investors, fairly so. Mutual fund companies try their best to attract customers with lucrative schemes, offers and plans. One thing that has contributed to the rising popularity of mutual funds over the years is that it offers benefits not only during the investment but also after it. Habitual investors who are able to judiciously plan and execute their investment strategies can safely rely on mutual funds to achieve their investment objectives. In this article, we’ll discuss some of the advantages of investing in mutual funds and why switching to this mutual fund plan might be more convenient than individual stock picking.
Asset diversification is both a golden rule of investment and a smart option for large as well as small investors. Because the funds are more liquid, they turn out to be less volatile. While you invest in a mutual fund, your total investment is allocated across different securities so that the little risk that is involved in mutual funds is spread out evenly. For example, if the price of stocks in a mutual fund is depreciating, and if the portfolio includes commodities and bonds, then these assets would cushion the blow that is caused by the risk incurred in stock pricing and will safeguard your overall investment. You can rely on the online Risk Analyzer Calculator to have a clear idea.
Tax saving benefits
An unexpected increase in the tax rate can give a blow to investors. In order to meet the rising costs of the expenditure as well as the tax compliances, some mutual fund schemes offer incredible tax benefits under section 80C of the Income Tax Act. This also includes Equity Linked Savings Scheme particularly a SIP. So when you invest in a systematic investment plan or SIP, you can invest in installments so that there is not much pressure on your finances.
Scope for growth
When an investor invests in a particular security, he majorly has growth in his mind. Mutual funds are one such growth-oriented investment option where investors have an opportunity to benefit from the growth of the Indian economy. Not ignoring the aspect that investments in equity or equity-related securities of companies are prone to significant risks, the chance of reaping greater returns from such funds always prevails the risks associated with it. Then mutual funds invest in the bonds and stock of high-grade companies. Investors can do their own research and invest in the stocks that they want without the involvement of any intermediary, thereby taking charge of their own investments.
Now that you know the advantages of investing in mutual funds, you must also be aware of the fact that in order to cope with the risks associated with it, you have to know your risk appetite. You can begin with your mutual fund investment today, by creating a KYC for mutual fund.