Why you should invest in mutual fund

Posted by ryan on May 16th, 2019

Mutual funds are attracting huge investment interest nowadays. Mutual fund is basically a professionally managed trust that pool savings of many investors (having common financial goals) and invest them in securities like stocks, bonds, short term money market instruments and commodities. Before investing in mutual funds let’s do a proper mutual fund research and look at the reasons as to why people think investing in mutual funds in India is a good idea?

Here are the reasons why you should invest in mutual funds:

Higher returns

Major reason for any investment is the return! Mutual funds provide the right avenue for investing in a variety of market-linked instruments, which have time and again delivered superior returns compared to other traditional investment options. Debt funds have consistently beaten Fixed Deposit (FD) returns, and as bank interest rates going down, they present a good investment choice for investors with lower risk appetites.

Professionally managed investment

When you invest in mutual funds, your money is managed by professional experts. The fund managers managing your investments is a full time, high-level investment professional who identifies the winning stocks to buy, when to buy them, and more importantly, when to sell them. They spend hours analyzing the performance of companies, and if they fit the fund they manage.

Disciplined investing

When you start a Systematic Investment Plan (SIP) in a mutual fund, you in a way commit to invest a certain amount on the same day of every month, consistently for a certain period of time. Such a commitment instills in you, the discipline to take a productive action towards your future goals. And it becomes a fixed component of your monthly spending, around which your all other expenses have to be factored.

Less or no lock-in

Almost every traditional investing instrument comes with long lock-in period, which makes it hard for you to get your money out, in times of emergencies. Mutual funds, on the other hand, come with less or no lock-in periods. Less or no lock-in period gives you the flexibility to redeem your money when you need it.

Diversification

We’ve all heard of the saying “Don’t put all your eggs in one basket”. This basically means diversification.  Mutual funds, comes with the advantage of default diversification, as your fund manager invests across a variety of stocks. Sudden changes in one stock are likely to be balanced out by the performance of other stocks in the fund. Also, it is an ideal way to get a taste of the equity markets, but with lesser risk.

Convenience

Investing in mutual funds is now a piece of cake, as you can easily find mutual funds online in India by many players in the industry. With mutual funds, you save up on additional paperwork that comes with every transaction, the amount of energy invested in research, actual market monitoring and conduction of transactions. All you have to do is simply go online or place an order with a broker to buy mutual funds.