Mutual funds should be one of the most vital component for investment of any family in India.
This investment tool offers the following benefits :
- Diversified investments : you can pick and choose the theme in which the fund corpus is invested. It can range from generic equity theme to more aggressive small cap funds.
- Professional management : the mutual funds are managed by investment professionals. It is one of the biggest advantage for investors who are not comfortable or do not have time to manage their investments.
- Reduced risk : the mutual funds are a relatively safer indirect option of investing in the stock markets. This limits the direct impact the market movements have on the funds. This is not to say that the fund values do not drop when stock markets fall.
- High returns : The long-term (3-5 years returns) from the mutual funds are better on following basis :
- Better than keeping the cash in savings bank account, doing nothing
- Higher return than traditional investment instruments : PF, PPFs, FDs etc
- Easy liquidity compared to the above traditional instruments,
- Regular dividends payment (or more units) and value growth.
- Investment options : The investment can be done :
- Lumpsum : in one go, especially useful when you get a one time bonus,
- Systematic Investment Plan (SIP) : small, regular monthly payments to keep buying more units in the whole pool. This offers following benefits :
- No big financial commitment,
- Regular and consistent portfolio growth,
- No manual intervention or effort required,
- Pricing/Units benefit : the price is constant variable. If the price falls, it increases the units bought, if price reduces, units decrease but the overall investment goes up in value.
- Quality over quantity : mutual funds allow you to focus on finding quality funds, from a relatively lower number of fund (compared to thousands of stocks).
So, how do you find the right mutual fund for you? Keep tuned
The next article is coming soon!!…… It is live now : Mutual Fund series – Which theme, sector or cap fund?
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