Why Mutual Funds are worth the Hype?

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Whether you are an experienced investor, a novice investor or even a millennial who has not received their first pay check, you would have surely come across the term “Mutual Funds”. There has been a tremendous increase in mutual funds investments over the years. This has been justified by a lot of investors who have earned lucrative returns and created a corpus for themselves by investing in mutual funds.

So, what exactly are Mutual Funds?

A Mutual Fund is basically a company that pools money from several people and invests it in securities like stocks, bonds and short-term debt. A mutual funds portfolio is a bundle of all its holdings. The profit derived from such investments is then shared amongst the investors in proportion to their investment.

This brings us to the next question, Whether Mutual Funds are worth the Hype or not?

Well, we would say - Yes!

So, are you worried about your Portfolio Diversification and the risks associated with investing in mutual funds? Do not worry! We will clarify all your doubts through this blog.

The rising number of people making investments in mutual funds cannot be denied. Today, investors are well-educated and make their choices wisely. With investment in mutual funds, there is security in terms of the company or institution where you have invested. Also, there is safety in terms of capital protection.

It has to be understood that no investment is 100%, risk-free but when you conduct a thorough research or take assistance of a professional investment advisor, you can hand-pick the best mutual funds and create an easy wealth-creation journey for yourself.

Let us discuss some reasons that justify why many investors prefer to invest in mutual funds and why they are totally worth the hype -

1. Managed by a Professional Team

Investors might not have sufficient time, knowledge or funds which is required to conduct high-end research and also to buy certain stocks or bonds.. However, thanks to mutual funds, investors can invest in these market-linked instruments through the assistance of professional managers.

Professional full-time mutual fund managers who have the knowledge, experience and the resources to actively buy, sell and monitor investments are in charge of running a mutual fund. To achieve the goals of the plan, a fund manager regularly examines investments and rebalances the portfolio when required. .

Thus, mutual fund investors can get professional advice and make the best of their investment from mutual funds.

2. You can start with a small amount

To invest in mutual funds, you don't need a sizable sum of money. You can often invest as little as Rs. 500 to Rs. 1000 each month. Because of this reason, mutual funds are a great source of investment for all types of investors. You have the option to start with modest and gradually raise it over time with mutual funds.

You can spare a fixed amount every month and invest in mutual funds through Systematic Investment Plan (SIP) and if followed in a disciplined and regular manner, SIPs help your corpus grow with time.

3. Immense Liquidity

If you are looking for liquid instruments of investment, mutual funds are the right option for you. When needed, you can quickly turn them into cash. Subject to exit loads, if any, your money is credited into your account within 2-3 business days after you submit a redemption request.

Thus, mutual funds are a great avenue to put your emergency cash that you can access when needed. However, always consider the lock-in period before you make any investment so that you can know the redemption amount, maturity and other important aspects.

4. Helps in Diversification of Investment Portfolio

Investment Diversification is a very crucial aspect. Mutual funds make fixed-proportion investments in a variety of businesses from various industries. This spreads your assets across several sectors and companies.

As it is a general rule that you must invest in multiple stocks if you wish to diversify your portfolio using stocks but with mutual funds, things are different as they invest in a variety of equities, making diversification simple.

Moreover, if you avail advisory services from an investment advisor, they take care of your mutual fund portfolio in a very systematic manner so that you can avail the best returns at all times.

5. Proper Regulation

Mutual funds are well-regulated and an organised form of investment. Under the SEBI (Mutual Funds) Regulations, 1996, Mutual Funds are Governed by the Capital Markets Regulator, Securities and Exchange Board of India (SEBI). In order to safeguard investors, provide transparency and adhere to fair valuation principles, SEBI has established strict rules and regulations.

Other benefits of investing in mutual funds include reduced tax liability under section 80C of the Income Tax Act, 1961 (on ELSS schemes), cost-efficient mode of investment and a big corpus in the long run.

Now we know why mutual funds are worth all the hype and how investing in mutual funds can prove to be a really profitable affair, if done in the right manner and increased amounts at regular intervals.

If you are interested in learning more about mutual fund investments, budgeting, saving and planning your wealth creation process, get in touch with mastertrust