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In today’s day and age, you have several options to invest money and achieve your set financial goals. But, if you are looking for a simple yet diversified way of investing, then mutual funds are the ideal solution. Mutual fund investments are convenient and professionally managed. There are multiple advantages of investing in mutual funds. Here are the five key benefits:
Simple and Convenient
Most investments can be complicated and risky, especially if you don’t have the appropriate financial knowledge. With mutual fund investments, you can conveniently set up an account by visiting a bank or a non-banking financial institution or even from the comfort of your own home. You also get a dedicated fund manager who guides you at each step and manages your investments efficiently.
Diversification
Like every other investment based on the market movement, mutual funds have their share of risks as well. But, your fund manager helps you in minimizing these risks by diversifying your investment portfolio. As the saying goes, it is always wise to never put your eggs in one basket. That is why your investments are placed carefully in more than one asset class (such as equity, stocks, debt funds and other money market instruments) to spread the risks. This way, when one asset class doesn’t perform well, your investments in the other class can compensate with higher returns, thereby making your investment safer.
Expert Management
If you don’t have the expertise to design your house, you will hire an architect, right? Similarly, if you do not have proper knowledge of financial markets, you can seek help from professional fund managers. They closely follow market trends and conduct exhaustive research before making any investment. It helps them in monitoring and managing your mutual fund investments and deciding where and when to invest the pooled funds. You can choose experienced and qualified fund managers and rest assured that your money is in good hands.
Liquidity
Another advantage of investing in mutual funds is liquidity. They are highly liquid assets and you can easily buy or sell a mutual fund scheme depending upon your requirement. You can choose to withdraw your money instantly, except in the case of close-ended mutual funds. However, you should keep an eye on surprises like exit load or pre-exit penalty and consult with your fund manager before making such decisions.
Invest in Smaller Denominations
If you are worried about the risks of big investments or don’t have the discipline to invest regularly, you can opt for Systematic Investment Plans (SIPs). They do not require large sums of money and you can start investing with a small amount every month. As you get more comfortable and your income grows, you can increase your investment with SIP top-ups. It helps you in cultivating a routine for investing periodically.
Mutual fund investments have the potential of delivering high returns. However, you should not forget that they are subject to market risks as well. So, they can be beneficial only if you are aware of the investment rules and seek regular guidance from market experts.
