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Great Investment Benefits Of Mutual Funds – 101

Learning How to invest in mutual funds is one thing? But ‘why‘ should we invest in Mutual Funds? What are the investment benefits of Mutual Funds.

Before answering the above question, we would like to phrase some key points here –

  • Mutual funds are highly Liquid, which means you can comfortably sell off mutual funds whenever you want without much difference in their value.
  • Mutual fund is an investment scheme managed by a professional asset management team.
  • Investors with same interests are brought together to form a couple investment in securities such as bonds, company shares etc.
  • Mutual Funds are different from stocks as Mutual Funds can be considered as a pool of stocks with several investors money invested.

Investment Benefits of Mutual Funds

Mutual Funds have ample reasons to be proud of, firstly, you are no alone in the massive pool of investment scheme. It is regulated by Securities & Exchange Board of India (SEBI). Secondly, they are managed by professional asset Managers which results in a cost effective solutions for everyone.

Some standard investment benefits of mutual funds which we reap are –

Convenience: Mutual Funds are Easily Accessible

There are a number of options through which one can purchase mutual funds hassle free. There are online brokerage firms, online Apps (Groww, Upstox, Zerodha etc.), Insurance Companies, Banks. This opens up the market for first time users or beginners to take advantage of investment benefits of mutual funds.

Variety: Mutual Funds Come In Different Categories and Types

Your decision to invest in mutual funds opens up various options where you can participate in different types of asset classes and sectors at different costs. As you grow your portfolio of mutual funds, you can choose to diversify into various mutual funds categories and types.
You can invest in the main asset classes (stocks, bonds, cash) and various sub categories or you can even invest in specialized areas, such as Sector funds , where based on your liking for a sector or you see the growth expected. Experiments lead to great experiences after all!!

Option to Diversify: Have Broad Market Exposure

One mutual fund can invest in dozens, multiple even thousands of different investment securities, hence making it possible to achieve diversification by investing in just one fund. However, we should play smart and invest in different mutual funds.

Investment benefits of mutual funds

Professional Management of Funds: Analyzing and Researching Done for You!

Unlike other investment schemes where you as an investor has to do your research and invest directly in the commodities, securities or stocks you prefer, in case of mutual funds, all investment needs are taken care by a professional management team who works for you and help you with a cost effective way of investing in the preferred mutual funds (stocks, securities, bonds etc.) The team with insightful research and technical analyzes of all the available options before investing. Hence safeguarding your interest at all times.

High Liquidity

Liquidity refers to the ease with which you can enter and exit from the investment in times of need. Mutual funds are highly liquid, than any other form of investment. You can easily sell off mutual funds whenever you want. The only parameter that needs to be taken care of is that unlike other forms of investment which can be sold at any hour of the day, mutual funds can only be transacted one a day after their Net Asset Value (NAV) has been calculated.
Having said that, you can sell the mutual funds at any time of the day.

The price at which the mutual fund is sold is subject to it’s NAV of that particular day. This feature in particular add to the great investment benefits of mutual funds.

Very Affordable: Minimum Investment Amount

With minimum investment options helping anyone and everyone to be a part of the pool. Depending on your contribution you receive the return on your investment. You can start from a meagre Rs. 500 with Systematic Investment Plan (SIP) from which you can opt-out anytime or you can invest a lumpsum amount for a lock in period of 1, 2 or 3 years.

Tax Saving Funds

ELSS Mutual Fund helps in getting yourself Tax Exemption of 1.5 Lacs a year under section 80C of the Income Tax Act.

Flexibility of Investing

Mutual funds can be utilized in a number of ways. One could invest in a single fund or multiple. Depending on your investment goal there are many investment strategies one could choose from. For example: Retirement plans, Dividends, Short term, long term savings etc.

Low Expense: Mutual Funds May Cost Less to Manage Than other Portfolio Types

Costs as a percentage of assets in the portfolio may be less for an actively managed fund, when compared to an actively-managed portfolio of individual securities. What adds up to this costing is the transaction costs, annual fees paid to brokerage firm and the cost for research tools or investment advice, Mutual Funds since they are managed by a team for not just one investor but many hence the cost is often less expensive than typical portfolio of stocks.

Dividend Reinvestment

As dividends and other interest income sources are declared for the fund, it can be used to purchase additional shares in mutual fund, therefore helping your investment grow.

Key Takeaways

Investment benefits of Mutual Funds

  • Safe & Transparent
  • Simplicity
  • No Minimum Limit for investment
  • Option to choose SIP or Lumpsum
  • Match your Style and Investment Goal accordingly
  • Low Lock in period of only 3 years
  • Management cost is typically lower than other investment schemes



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