Ever since the announcement of mutual funds, they have always been the first and best investment option for the investors.Their simplicity provides great benefit even for people new to trading to get started with investing.
Below are some benefits of Mutual Funds that you need to know as an Investor.
The most important advantage of mutual funds is that all the money you invest is managed by professionals.Mutual funds offer investors the opportunity to earn an income or build their wealth without spending much time in research and analysis as everything is taken care by the professional management team.
Affordable Portfolio Diversification
Diversification is spreading risk across different types of assets, including stocks, bonds, and cash.Even a small investment of Rs. 500 in a mutual fund scheme can give investors a diversified investment portfolio.Consequently, the investor is less likely to lose money on all the investments at the same time as his investment is diversified.
Economies of Scale
The money pooled from a number of investors makes it possible for mutual funds to engage fund managers to manage the large sum of investment.This cannot be achieved by an individual investor as they cannot afford to research, office space or hire a professional management team.
Large investment corpus leads to various other economies of scale.The higher transaction volume makes it possible to negotiate better terms with brokers, bankers and other service providers.
Thus, investing in mutual fund offers a distinct economic advantage to an investor as compared to direct investment in terms of cost saving.
At times, investors in financial markets are stuck with a security for which they can’t find a buyer – worse, at times they can’t find the company they invested in! Such investments, whose value the investor cannot easily realize in the market, are technically called illiquid investments and may result in losses for the investor.
Investors in a mutual fund scheme can recover the value of the money invested, from the mutual fund itself. Depending on the structure of the mutual fund scheme, this would be possible, either at any time, or during specific intervals, or only on the closure of the scheme.
Mutual funds are not liable to pay tax on the income they earn. If the same income were to be earned by the investor directly, then tax may have to be paid in the same financial year.
Mutual funds offer options, whereby the investor can let the money grow in the scheme for several years.This helps investors to legally build their wealth faster than would have been the case if they were to pay tax on the income each year.
Specific schemes of mutual funds (Equity Linked Savings Schemes) give investors the benefit of deduction of the amount subscribed (up to Rs. 150,000 in a financial year), from their income that is liable to tax. Sec 80C of the Income Tax Act allows you to claim deductions from your taxable income by investing in certain investments. One of the most popular Sec 80C investments is in tax saving mutual funds or Equity Linked Savings Scheme (ELSS).
This is an equity diversified fund and investors enjoy both the benefits of capital appreciation, as well as reduces their taxable income, and therefore the tax liability.
The options offered under a scheme allow investors to structure their investments in line with their liquidity preference and tax position.
There is also great transaction conveniences like the ability to withdraw only part of the money from the investment account, ability to invest additional amounts to the account, setting up systematic transactions, etc.
Once an investment is made with a mutual fund, they make it convenient for the investor to make further purchases with very little documentation. This simplifies subsequent investment activity.Tradeplus Offers unique Mutual Fund platform where you can invest, track, manage and redeem all your mutual fund holdings with ease.
The regulator, Securities & Exchange Board of India (SEBI), has mandated strict checks and balances in the structure of mutual funds and their activities. Mutual fund investors benefit from SEBI protection.
Systematic Investment plans
Mutual funds also offer facilities that help investor invest amounts regularly through a Systematic Investment Plan (SIP); Such systematic approaches promote an investment discipline, which is useful in long-term wealth creation and protection.You can check the unique Flexi SIP Plan offered by our INFINI MF platform that provides investors with the flexibility and convenience to choose any desired frequency to invest without sticking to the predefined frequencies existing. The Flexi plan allows the investor to choose each SIP installment with a different investment amount and on different dates within a period of 3 months. The order gets placed according to the details provided by the investor giving the investor utmost flexibility with the SIP investment.