Why you should Invest in Mutual Funds?

Why you should Invest in Mutual Funds:

  • Small investments– One can start investing in Mutual Funds (via SIPs) with an amount as low as 500. Using the Systematic Investments Plans (SIPs) mode of investing, investors can choose to invest in Mutual Funds at pre-defined intervals that can be fixed for weekly/monthly/quarterly or yearly installment, thereby avoiding the burden of paying a huge amount at one point.
  • Flexibility- SIP installments in mutual funds are to be paid at fixed intervals, which develops a sense of responsibility and reliability among the investors. Mutual funds offer flexibility to its investors in terms of increasing or withdrawing their principal amount depending upon their own needs.
  • Rupee Cost Averaging– Mutual funds investments allow investors with investment objectives for the long term to benefit from their investments due to the concept of Rupee Cost Averaging (in SIP investments).
  • Power of Compounding- Power of Compounding is another feature that helps investors gain from their investments in Mutual Funds. This ensures that investors benefit not only from the principal amount invested but also from the gains on the principal amount.
  • High returns– In comparison to the interest earned on conventional modes of investing, FDs, for instance, Mutual Funds deliver higher returns that help to beat inflation in an efficient manner.
  • Tax Benefits– Certain mutual funds like ELSS (Equity Linked Savings Scheme) also offer tax benefits to investors. For example, ELSS offers tax exemption on investments up to Rs.1.5 Lakh under Section 80C of the Income Tax Act.
  • Ease of Investment– It is quite convenient to invest in Mutual Funds since there is no direct involvement of the investor with the market. She/he just needs to register with the fund and start investing. There is no need to monitor the financial market on an everyday basis like one does in trading of stocks.
  • Economies of scale– Mutual Funds offer economies of scale. When an investor opts to invest in mutual funds instead of individually buying stocks in the market, s/he saves on the transaction costs incurred.
  • Aggregate Investing– Mutual Fund investments bridge a gap  between an investor and the fund houses as they accumulate money from lots of small investors and invest in stocks and securities which might otherwise be difficult for an investor to buy individually. Aggregate investing leads to a reduction in transaction costs thereby benefiting the individual investor.

Comments

Post a Comment

Popular posts from this blog

Strategies that can help you manage your debt situation better/ Repay Loan

Image
Strategies that can help you manage your debt situation better: Repay high interest loans first As a first step, you need to prioritize the repayment of your loans. Make a list of all outstanding loans and then identify the ones that need to be tackled first. Ideally, start by repaying the costliest loan.   Increase repayments with rise in income One simple way to repay your loans faster is to bump up the EMI with every rise in your income.   Use windfall gains to repay costly debt Received a fat bonus? Do not splurge on the latest smart phone or newest plasma TV. Use the money to pay down your debt aggressively. Windfall gains, such as income tax refunds, maturity proceeds from life insurance policies and bonds, should be used to pay costly loans like credit card debt or personal loans.   Convert credit card dues to EMIs Credit cards are convenient and give you interest-free credit for up to 50 days. However, they can also burn a hole in your wallet i...
Read more

Hedge Fund : Who Should Invest in Hedge Funds?

Image
Hedge Fund: A Hedge Fund pools resources from investors and invests them in domestic as well as international markets to generate quality and long-term returns. “Hedge” essentially means to protect oneself from any potential financial loss or any other adverse circumstances. They are often set up as private investment limited partnerships where only accredited and institutional investors can invest their money. Securities and Exchange Board of India (SEBI) has categorized hedge funds under Category III as Alternative Investment Funds. It defines hedge funds as “ funds which employ  diverse or complex trading strategies and invests and trades in securities having diverse risks or complex products including listed and unlisted derivatives.” As the name suggests, hedge funds are supposed to “hedge” against market risk. Their investment style and fund management are directed at achieving the aim of generating returns at reduced risks. Although, with changing times, the strategies...
Read more

How To Make The Most of Power of Compounding?

Image
How To Make The Most of Power of Compounding? As an investor, you can inculcate the following financial habits in your financial decisions to benefit from your mutual fund investment via the power of compounding: Start Investing Early The earlier you start investing, the better it is as it allows you to have a longer investment horizon. Longer the investment horizon, greater the probability of earning higher returns as investment risk gets reduced over longer time periods. So, in order to make the most of the power of compounding from your mutual fund investments, start investing as early as you can. If you have not started yet, start investing now! Be a Disciplined Investor Being a disciplined investor means investing regularly and monitoring it periodically. Investors should avoid ad hoc and abrupt investment decisions and follow a proactive and well thought out investment strategy. Be A Patient Investor Patience and investing go hand in hand. In order to earn go...
Read more