Why should you invest in mutual funds? Do you disagree with any points?

Dr. Deepti Dwivedi

Mutual funds are one of the best investment options for people who would like to build substantial wealth over the long term through patient investing. A mutual fund is a professionally managed investment vehicle that collects money from many investors and invests those funds into stocks, bonds, or money market instruments. They are one of the best ways to diversify your risk and grow a portfolio.

LIQUIDITY

The best thing about mutual funds is that it offers liquidity to the investors who want money when they need it. Mutual fund prices fluctuate daily, and one can redeem/sell units of a mutual fund scheme any time during market hours by instructing the AMC or Asset Management Company where the money is parked currently.

DIVERSIFICATION

Mutual funds are an excellent way to diversify your portfolio, as the fund manager does it for you. There is no hassle in choosing which sector to invest in and what stocks to buy or sell. While equity mutual funds do have their share of risks, diversification can help compensate for the loss. By investing in different stock industries and sectors, the fund manager builds a portfolio that reduces risk when one sector or industry does not perform well.

LONG TERM AND SHORT TERM GOALS IN MUTUAL FUNDS

Mutual funds allow you to earn more money as they are suitable for long-term and short-term goals. For example, if you have a long-term goal like buying a house or saving for your child’s marriage, then mutual funds are a good investment vehicle that can be easily liquidated when the time comes. On the other hand, if you have a short-term goal, say buying a car next year or going on a holiday, then you can choose the suitable mutual fund schemes and save for your goal in a short time.

EXPERTISE

Mutual funds offer the advantage to the investors where the fund managers have studied and researched various sectors, their advantages, and disadvantages. They use this knowledge to make wise decisions when it comes to investing. Then, the expert fund managers choose the best type of fund which suits your needs, be it aggressive or conservative.

FLEXIBILITY TO INVEST IN SMALL AMOUNTS (SIP)

Investing in mutual funds is flexible as one can invest large amounts at one go or small amounts over a period of time. Mutual funds offer a Systematic Investment Plan (SIP) option to the investors to choose the amount they want to invest periodically. This is helpful for those with a fixed income and who want to make the best use of it. They can invest small amounts consistently and build a good corpus eventually.

EASY ACCESSIBILITY

One of the most significant benefits of investing in mutual funds is that it gives easy accessibility to your money. In addition, mutual fund companies offer many options where investors can choose from, like getting their dividends reinvested or withdrawing their money when needed.

LOWER INVESTMENT AMOUNT

Investing in mutual funds is beneficial as it doesn’t require much money to begin with initially. One can invest from Rs.500, and above depending on the fund they choose to start with, whereas direct stock investing requires one to have a considerable amount before they start buying stocks for investment purposes.

Mutual funds are one of the best investment options available for investors. The benefits that one gets from it, like liquidity, expertise, easy accessibility to money, and diversification, are hard to find in any other financial instrument. Therefore, it is advisable for people who want to invest their money and not worry about the fluctuations in the market daily should go ahead and invest in mutual funds rather than directly investing in stocks. So, considering all the benefits of mutual funds, it is a good option for people who are new to the concept of investing.