Over the last few years, mutual funds have become the preferred investment option for a lot of people. In a country like ours, where people have traditionally been risk-averse and have only trusted FDs and gold, it is a significant shift.
But, have you ever wondered what is causing this shift and why is everyone looking to invest in mutual funds? Why are FDs, gold and other traditional saving options losing their appeal?
From diversification, professional management, liquidity to customizability, there are a lot of features that set mutual funds apart. But, how does these feature work for your benefit?
Read on to know all about it.
Professional Management
One of the biggest advantages of mutual funds is that your money is being managed by experts. Each fund is helmed by a fund manager who has in-depth knowledge of financial markets and has years of experience in managing money.
The fund manager and his team continuously monitor various securities and economic variables and keeps optimizing your portfolio as per changing market conditions. This ensures you get the best possible returns on your investments, without having to keep track of the best investment opportunities continuously.
Liquidity
Liquidity is an essential aspect of any investment. And one of the chief benefits of investing in mutual funds is that your investment always remains accessible to you.
Most funds do not have any lock-in period (apart from ELSS funds), that means you can redeem your investments whenever you need the money. The mutual fund houses are obligated to accept your redemption request and credit the money in your account within a defined time-frame (typically in 1–2 working days).
This flexibility of selling and buying is somewhat unique to mutual funds. Investments like real estate can be highly illiquid, and while you can break your fixed deposits, it means penalty plus a lesser interest rate.
Customizability
There is a mutual fund scheme available for every possible investment objective.
Whatever might be your investment goal, time-frame for investment or your risk appetite, you are sure to find a scheme that will suit your need.
From high-risk, high-reward equity funds to low-risk debt funds that offer slower, steadier growth, as well as everything in between, mutual funds are perfect for your different investment objectives.
Low Costs
Mutual funds are some of the most cost-effective investment avenues available. There are two types of cost in mutual funds- the fees mutual fund house charges and the cost of buying and selling your investments.
For zero-commission direct plans, the mutual fund house typically takes somewhere between 0.5%-1.5% of the returns generated. This is a minuscule amount for the professional expertise, liquidity and high returns they provide.
The transaction cost that needs to be incurred for buying and selling your mutual fund investments is now zero, thanks to ETMONEY where you get free for life account, which offers unlimited free transactions, further bringing down the costs.
Better Returns
Equity mutual funds over the long term have beaten most investment options when it comes to returns generated.
That’s because equity funds invest your money in companies that are driving India forward, and you directly benefit from the growth of these companies.
So for your long term investment objectives, equity mutual funds come across as the only investment option capable of beating standard inflation rates over the years and in turn help you build a sizeable corpus required to fulfill your goals.
Well regulated
All mutual fund houses function under the purview of SEBI (Securities and Exchange Board of India).
SEBI is a government agency that supervises the mutual fund industry and works to safeguard the interests of the investors. A close check by such a regulatory agency ensures transparency in the operations of these funds.
Diversification
Mutual funds allow you to have a diversified portfolio in a much easier and cost-effective way.
When you invest in a mutual fund scheme, the scheme based on its mandate puts your money not in companies across industries and sectors, but also across asset classes such as equity, debt, etc. This spreading out reduces risk as all asset classes/securities rarely fall at the same time.
So now that you know why mutual funds are so great, why not start investing? ETMONEY makes that super easy. With hand-picked funds for every need along with an account with unlimited free transactions and easy portfolio tracking, you can put your money to work with a chance of getting higher returns.
However, if you want to read more about mutual funds, here is a link to our blog that talks about different types of mutual funds.
