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Why to invest in mutual funds?

Why to invest in mutual funds?

 

1. Inflation-beating returns:

Among all other investments, equity fund schemes have historically been able to provide market-beating and inflation-beating returns. Most safe investments like fixed deposits, recurring deposits, etc. offer a rate of interest that provides little to no increase in money value after accounting for inflation.

2. Diversified portfolio:

Investing in an equity mutual fund scheme means that the investor will hold a huge number of stocks and shares of various companies across different business processes, themes, sectors, etc. Holding a wide variety of stocks in one’s portfolio ensures that no great losses occur which cannot be offset by gains in another part of the portfolio.

3. Capital appreciation:

As one of the only few financial products that can provide real market and inflation-beating returns, equity mutual fund schemes are the only real option for those who wish to invest and grow their capital over the medium to long term.

4. Tax benefits:

The Equity Linked Savings Schemes, or ELSS as they’re commonly known, allow for up to Rs.1,50,000 to be spared from annual taxable income every year if invested in this avenue. ELSS is also the only tax saving investments under Section 80C that has provided such high historical returns - no other Section 80C has been able to match the returns generated by equity mutual funds.

5. Professional management:

Most equity mutual fund schemes are managed by professional fund managers with advice from market analysts. This live tracking on investment securities and investment opportunities allows for risk mitigation and clarifies the choice of which stocks to invest in.

6. Liquidity:

Stocks and shares are traded across all major worldwide exchanges on a daily basis. While not immediately as liquid as withdrawing funds from a savings bank account, the liquidity offered is far higher than most other mutual fund schemes or investment plans.

Vikas Deshmukh

Independent Financial Advisor 

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