For old investors and those who are starting out, mutual funds are a wonderful and convenient way to invest your money.
Here’s are 7 reasons (in no particular order) that you should consider buying mutual funds:
- Diversification. When you buy a Mutual Fund, you buy a collection
of what that Mutual Fund has invested. Diversification means the Mutual
Fund has spread out your money over different companies and/or different
types of assets. Your money is invested in a mixture of products with high
and low risk to both helps it grow and also protects it.
For example: Large Cap funds diversify by investing in equity shares of different companies which have large market capitalization and are very well established. A hybrid fund diversifies by investing in a mix of stocks and bonds. - Low Minimum Investment. You can get started with investing in most Mutual Funds with as little as Rs 100.
- Professional Management. Mutual fund managers and analysts wake up each morning with one goal – to research, analyze and study current and potential holdings for their mutual fund. And your investment advisor studies and evaluates mutual fund managers to pick the best funds to help you meet your goals.
- Lower costs. Buying stocks and bonds costs you more (set up of a DEMAT account/ transaction fee etc.). Because they manage large amounts of money on behalf of lakhs of individual investors, mutual funds are able to take advantage to reduce transaction cost.
- Systematic Investment Plans (SIPs). SIPs make it simple to invest regularly in a mutual fund with as little as Rs 100 a month. Once you register your bank mandate with an online platform, just set up a SIP with any amount you are comfortable with on any date of the month in a Mutual Fund of your choice. The money is automatically debited a day or two before that day every month and invested in that scheme so your investment habit gets regularized.
- Transparency. The investments that a Mutual Fund makes are publicly available every month, so if needed, you can see what your fund manager is doing.
- Liquidity. Because your money is spread across so many stocks and bonds, you can sell your mutual funds at any time to meet your financial needs.
A mutual fund can offer a simple and efficient way to invest for your life goals – whether retirement, education, buying a home, or just generally making sure your money grows.