Benefits of Investing in Mutual Funds
Since their creation, mutual funds have been a popular investment vehicle for investors. Their simplicity along with other attributes provide great benefit to investors with limited knowledge, time or money. To help you decide whether mutual funds are best for you and your situation, we are going to look at some reasons why you might want to consider investing in mutual funds.
Instead of you making decisions based on gut-feel or what someone told you, when you buy into a mutual fund, you simply leave your investments in the expert hands of Professional fund managers, who invest your money on the basis of minute analysis and astute investment strategies. With their skill and experience at work, your money ends up in the relevant assets or the right place to do the right thing by you – grow your money. (If the terms and procedures make you dizzy, stop worrying about it – it’s your Fund Manager’s job to understand the fine print so let the professionals take over.)
As far as you’re concerned, this is vital after all, it’s your hard-earned money we’re talking about! With mutual funds, the risk factor is significantly reduced as the money gets invested in a large number of securities, across categories and various asset classes. So, even if one scrip were to suffer, chances are that some other scrip would do favorably and even out the losses.
A better portfolio for less money
Say you want to invest Rs.5000 in a topnotch software company. And then you find that that’s not enough to buy you even one share in it! Rather than get shattered, if you invest that same Rs.5000 in an Information Technology Mutual Fund, you get yourself a proportionate share in a large number of premium software stock scrips.
Lower Transaction Cost
A mutual fund, by virtue of its status and the sheer volume of its investments is able to carry out buy-and-sell transactions much more cost effectively than you would all by yourself.
As with any investment, there are risks involved in buying mutual funds. These investment vehicles can experience market fluctuations and sometimes provide returns below the overall market. Also, the advantages gained from mutual funds are not free: many of them carry loads, annual expense fees and penalties for early withdrawal.
He has authored several analytical articles on personal finance in The Times of India and The Economic Times. Being a finance geek and having been involved with internet since the early days of the medium, he was a great help and source of guidance while formulating personalmoney.in. You can know more about Manish at ManishMisra.com
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