Investing in Mutual Funds: Seven Reasons Why it’s a Great Idea

Investing in mutual funds is a preferred mode of investment for millions of investors worldwide, and in India, it has been a preferred mode for over 2 crore investors. The asset under management in India stands at over Rs 24.5 Lakh crore and still witnessing a healthy growth.

The Indian mutual fund sector has come a long way, from one player in 1963 i.e Unit Trust of India to 44 players operating in India offering over 2000 mutual fund schemes.

A lot of its success can be attributed to the innovations and opening up space to foreign players who brought in technology, competitiveness and professionalism in managing assets.

Below, is the seven reasons, why you should be investing in Mutual Funds over participating directly in the market.

Ease of Investment and No Specialised Knowledge Required

Investing in mutual funds does not require you to have specialised knowledge of the industry. You should understand the basics of investing so that you can review your investments and check whether its fulfilling the investment objective or not.

Professional Management

All mutual fund schemes are professionally managed and are governed as per the rules and regulation of SEBI. The fund manager has access to several data points to monitor the performance of the fund regularly and swiftly takes the decision on any specific investment needs.

It also helps to take out the emotions from investment, which prevents you from making smart decisions.

Diversification/ Low Risk

One of the major built-in features of the mutual fund is Diversification. The fund invests in different companies across the sector and industries, which helps to minimize the downside risk in investment. Whereas, investing directly in the market eludes the investor from achieving diversification and is more exposed to risk.

Low Cost- Higher Return Potential

The structure of mutual funds is designed to get a maximum potential return at a less cost. Over the Long term, the cost associated with investing in mutual fund becomes immaterial. Well managed mutual fund schemes help to beat the returns from the traditional saving instruments by double or triple percentage points.

Investment Flexibility

Investor enjoys the flexibility of investing in the mutual fund in both lump Sum and Systematic Investment (SIP) route. SIP route helps you to systematically build your portfolio without feeling the financial strain and create wealth over the long term period.

Highly Liquid Instrument

Mutual Funds are highly liquid in nature and you can easily redeem your investments at any time and receive funds within a couple of days in your bank account. Asset management companies daily release the NAV (price per unit) of the schemes at the EOD, based on which investments are valued.

Safe and Secure

The Mutual fund Industry is regulated by the guidelines of SEBI and under the rules, no mutual fund company can conduct or invest in businesses outside the horizon of a fund’s investment objective.

All mutual fund houses release a quarterly report of all their schemes, through which you can keep a loop on investment performance.

Final Words

Given the volatility and noise in the market, its gets extremely difficult for any investor to actively manage their investment portfolio. Mutual funds, with its established risk-reward methodologies, help you to achieve desired investment objective without the trouble to manage each and every market moves and risks.

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