Mutual funds allow traders to purchase the stocks of a company and make money from the long-term investment. It can help you achieve your short-term and long-term financial objectives. A mutual fund is a type of Equity Investment. Make sure that this investment is subject to market risk, meaning the demand and supply factors in the market can have an impact on the value of the stocks you have purchased from a company listed on stock exchanges. On that note, let’s dive deep into the 7 main benefits of mutual funds investment.
1. High Returns on mutual funds investments
Owing to the high risk associated with mutual funds, this equity investment can generate higher returns. Though mutual funds can benefit all types of traders, it is highly recommended for long-term buyers who are willing to keep the stocks for at least 1-3 years.
You could make an investment when the shares are available at a low price. Mutual funds might be associated with a high risk, but they guarantee the best returns.
2. Smooth Management
The best part about mutual funds investment is simple and smooth management. No need to monitor the performance of the stocks every day.
Once you are done investing in a company, you can leave the rest to the fund managers. Each investor is assigned a fund manager who is responsible for catering to all your investment-related requirements.
They handle the transaction on your behalf and track the performance of the company for you. The fund manager guarantees smooth and effective investment profile management.
If you plan on making an investment but aren’t familiar with the stock market, then a mutual fund is the best way to start your investment career.
3. Investment Portfolio Diversification
You don’t have to limit your investment options to the stocks of a particular company. One major benefit of mutual funds is that it allows the investor to diversify the investment portfolio by choosing the shares of different companies. That way if one company fails to perform well in the market, you will not lose all your savings on it.
As long as you have invested in other companies, rest assured that it will counterbalance your losses. Portfolio diversification plays an integral part in mitigating the risks associated with the share market.
Mutual funds are highly volatile. One way to manage the risk is by diversifying your portfolio.
4. Easy to Use
You can invest in mutual funds through three simple ways, i.e. online investment, direct investment, and brokers. A majority of investors choose online mutual funds investment as it is far easier and convenient.
All you need is a valid PAN card. There you go! Once you are done verifying your investment account, you can choose the most suitable shares and complete the transaction.
In fact, mutual funds investment allows you to make your first investment with INR 500 only. You don’t need a large capital to purchase the shares of the popular companies listed on stock exchanges.
Opt for the SIP mode and make your first investment. If you are new to the mutual fund market, consider hiring a professional advisor. They will help you make the best investment decisions.
5. Tax Benefits of mutual fund investments
Mutual funds investment offers you a tax benefit of up to 1.5 Lakh annually. Besides that, you also get tax-free returns. It is available for the investors who hold the stocks of a company for more than 12 months.
On long-term capital gains, you are supposed to pay approx 10% of taxes on the returns, i.e. if the total capital gains exceed the minimum limit of INR 1 Lakh.
6. Mutual fund Easy Liquidity
Another major benefit of mutual funds is easy liquidity. There is no denying mutual funds are highly liquid, which means you can convert your investment into cash at any time.
In other words, you could redeem your returns whenever you want. All you need to do is sell your investments and you will have the money transferred into your bank account.
The redemption process does not take longer than a week. In fact, if your investment is matured, expect the amount to be transferred in 2-3 business days.
Though experts recommend you hold the shares for at least 1-3 years, you don’t have to wait for that long.
6. Systematic Withdrawal Plan
The mutual funds market enables the investor to withdraw a specific amount from their investment to their bank at regular intervals. You get to select the intervals.
Based on this, a certain amount of your investment will be transferred to your bank account at the selected intervals.
So, these were the top 7 benefits of mutual funds investment. Despite being a volatile market, mutual funds can bring you significant profits, especially if you opt for the lock-in investment period.
So, why wait? Register an account on an investment platform and make your first investment.