Reading this blog will give you some knowledge of some fundamental advantages of investing in Mutual funds compared to other investments like investing in stocks, real estate, gold, fixed deposits, etc.
1. Diversified Funds: With mutual funds, you can have a diversified portfolio which means, unlike shares, all your eggs are not in the same basket. Some funds could be pure debt, while others could be just equity which is a mix of both.
2. Funds that match your risk appetite: You can choose between a large-cap equity fund that will be less volatile but offers a lower return on investment but more stable returns or a small-cap fund that can fluctuate wildly but could give you a higher rate of return.
3. High Liquidity: You can buy or sell your funds at any time except few funds like tax saver funds meaning you can get your money any time you want, unlike investing in property or fixed deposits. You can also mortgage your mutual funds in case there arises a need for some quick money.
4. Flexibility is the key: The best part is that you can invest in SIPs which are systematic investments every month as per your monthly paying capacity, and also invest in lump sums at intervals as and when you have excess funds. This way, you can build your corpus at your convenience.
5. Cost-efficient: A mutual fund is usually more cost-efficient as brokerages are comparatively lower than purchasing shares.
6. Reduce your tax liability: You can invest in Tax savers, thereby reducing your tax liability as they offer tax exemption up to Rs.1,50,000.00 from your annual taxable income under section 80C of the Income-tax act.
7. Dividend reinvestment: Dividend reinvestment is one of the best parts of investing in mutual funds. The dividends received can be used to purchase more units, thereby making your money grow at a compounding rate.
8. Access to professional investment Managers: You can avail yourself of professional mutual fund advisors or money managers so that you don't have to worry about switching funds, deciding on what to purchase, etc. A good investment consultant can know your financial goals.
9. Easy to access and track: You are sent monthly statements on your registered email id so that you can follow the growth of your investments at the press of a button.
About the Author : Abhijit Sawant is MD and Chairman of ABHI Ganesh Investments Pvt. Ltd, one of Goa's leading Financial Planners from Goa, India. Abhijeet is also a member of Business Network International (Samudra Chapter) Goa.
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