Mutual Funds Sahi Hai advertisement is running everywhere these days. the good thing is that the ad talks about all the right things for investment.
There are many investment opportunities in the market such as bonds, stocks, money market instruments, equities, mutual funds, shares, etc. This abundance of investment options poses a unique problem to investors who are looking for different options to earn additional income and gain wealth.
Investors can try any of the above mentioned investment options, or opt for a combination of two, three, or more of them. But each of these investment choices come with its own set of advantages, hindrances, and challenges.
Out of all of the above options of investment, one can safely say that mutual funds are the best and offer the most benefits with least percentage of shortcomings and/or risks.
Why invest in mutual funds?
With regards to mutual funds, people can invest their money in a professionally managed portfolio made up of securities spread across stocks, bonds, equities, large caps, small caps, mid caps, and money market instruments, etc.
Investors can select from the diversified range of distinctive mutual fund products such as exchange-traded funds, fund of funds, sectoral funds, and fixed maturity plans, etc. There is no doubt that investment in Mutual funds sahi hain!
Mutual funds offer a number of benefits to investors and listed below are some common advantages of investing in them.
1) Mutual funds are managed by experts
Every mutual fund is managed by a professionally qualified fund manager. This means that even those investors who have no idea about different kinds of investment options can read up about the portfolio of different mutual funds, its annual returns, and profitability since launch, etc., and accordingly make a choice.
It is the responsibility of the fund manager to ensure that the fund remains profitable. A committed team of researchers assist the mutual fund manager round the clock. The manager may change the portfolio of the fund as per market performance of the associated securities, etc. as well as future prospects.
Financial decisions of the manager are made on the basis of outlook and performance, which helps him/her deliver the main objective of the scheme. The investor thus need not be on constant lookout about market changes; the fund manager will ensure that your investment keeps on creating wealth.
2) Mutual fund investment cost is low
One of the main benefits of mutual fund investments is the fact that it has low cost of investment as opposed to direct investment in stocks and other capital market instruments. Investors need to put up substantial capital if they want to invest in stocks and this can act as a deterrent for investors who are young and just venturing into investments.
The fees and brokerage costs for mutual funds are lower than capital market investments, which consequently translates to low prices for investors. Investors can begin their foray into the investment market by investing amounts as low as INR 500 and subsequently gain the benefits of investing in long-term equity.
3) Mutual fund investments beat inflation
Most people choose to keep their money in a savings account in banks. They are usually happy with the interest provided by the bank which helps their savings “grow.” It may however be noted that savings in banks are affected by inflation, which can gradually deflate its value.
On the other hand, mutual fund investments offer returns that are better adjusted to inflation. Investors can thus keep creating wealth without spending excess energy and time on the adverse effects of inflation.
For example: Let’s assume that you currently have INR 1000 in your savings bank account. This money can help you purchase about 5 shirts today. The interest rate offered by the bank is 6 percent per annum. Thus, your savings will grow to INR 1060 by next year. However, there was a rise of 7 percent in inflation that year. Thus, the cost of a shirt is now INR 214 and 5 shirts will cost INR 1070. This means that you will not be able to buy 5 shirts the next year with the INR 1060 that you have in your savings account.
Mutual funds offer the perfect investment opportunity to put your money for long-term growth that is adjusted to inflation. This means that your money’s purchasing power remains intact and does not drop in the future.
4) Investing in mutual funds is convenient
Most of us do not want to put in a lot of time or effort when looking for investment options. Investing in mutual funds is both time saving and convenient. It also offers different choices of low investments of varied amounts.
Investors can select from the innumerable available options as per their investment requirements and goals. They can sell or buy mutual funds on any business day. All these increase the convenience of the investors and allow them ample freedom to continue their daily lives without worry, while their mutual fund investments continue to earn and generate wealth.
5) Mutual fund investments have potential for higher returns
Mutual funds offer the option of investing in a wide and diverse selection of industries and sectors. Thus, long term or medium term mutual fund investments come with the potential of higher yields or returns.
6) Mutual funds investments are diversified
Mutual fund schemes distribute the investment of investors across a diversified choice of assets. This helps significantly mitigate or ease the threat of market risks. Even those with limited capital for investment can take advantage of this option and generate wealth with minimal of risks. Mutual funds sahi hain!
7) Mutual fund investments offer increased transparency and safety
Fund managers of mutual funds offer periodic information about the outlook of the scheme, the strategy and plans, and the current value of the fund. This allows investors to get an idea about the financial health of their investments.
Investment of any type comes with some amount of risk. With regards to mutual fund investments, such risk is reduced to a large extent via skillful professional fund management, diversification of investments, and selection of securities that are fundamentally strong and sound. All these also help boost the chances of increased returns in the long term future.
The Securities and Exchange Board of India (SEBI) regulates each and every mutual fund scheme available in the market. Investors can thus remain assured about well-regulated, disciplined, and safe management of their mutual fund investments.
8) Mutual funds have high liquidity
Mutual funds which are open-ended allow investors the benefit of quickly getting back their money. With regards to investments in close-ended schemes, investors can trade them in the exchange, as permitted by some mutual funds.
All the above advantages show that Mutual funds indeed sahi hain!