People refrain from investing in mutual funds because of the high-risk factor. But mutual funds offer great returns and have multiple benefits like other investment schemes. After understanding mutual funds benefits, several investors become willing to take the risk of investing in them. Start scrolling to become familiar with the different benefits of mutual funds.
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Diversification
Mutual fund shares are great for diversifying your shares across different securities and assets, including equity, gold, and debt. You will distribute the risk as all your money won’t be in the same place. Diversification can be beneficial when any underlying security of a specific mutual fund comes under market headwinds.
Diversification ensures that others can tackle the risk surrounding a particular asset class. When the value of a particular investment is in your portfolio, others will remain unaffected and might even rise in value. Therefore, you won’t lose your entire investment if a specific portfolio component undergoes a turbulent phase.
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Professional Management
Investors often lack the time, expertise, or resources to conduct their research and buy specific stocks or bonds. But they can always hire professional money managers with adequate experience in managing mutual funds on your behalf. The professionals will actively buy, sell, and track your investments on your behalf.
A mutual fund manager will constantly monitor your investments and perform portfolio rebalancing according to requirements to fulfil your financial objectives. You can always choose Aditya Birla Sunlife mutual fund house to look after your investment needs. Their asset management skills stem from 25 years of strong market research.
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Transparency
According to SEBI guidelines, mutual fund products have a colour coding for investors to comprehend the level of risk. The different colour codes are as follows:
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Blue for low risk
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Yellow for medium risk
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Brown for high risk
The labelling makes the entire investment process safer and more transparent. Moreover, investors can also check the credentials of the fund manager, years of experience, solvency details of the fund house, and more to make an informed investment decision.
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Easy to Buy
Mutual funds are universally available and are easy to buy. You will be able to buy and start investing in mutual funds from any corner of the world. Mutual funds are offered by Asset Management Companies and distributed via brokerage firms, registrars, banks and agents, online investment platforms, or AMCs themselves. Moreover, you won’t need a Demat account to start investing in mutual funds.
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Tax Benefits
ELSS mutual funds are great tax-saving instruments and help you enjoy tax deductions of up to Rs 1.5 lakhs in a year. ELSS mutual funds can offer higher returns than other tax-saving investments like PPF, NPS, and FDs. You can also earn tax deductions on the returns from a mutual fund.
Moreover, the tax-saving mutual funds also have a low lock-in period of 3 years, whereas it is 5 years for other tax-saving options like PPF and FD. You can also stay invested in the mutual fund after the end of the lock-in period.
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Flexibility of Investment
The minimum investment requirement in a mutual fund is Rs 500. But the maximum investment amount in a mutual fund scheme can be according to your wishes. Individuals from different walks of life can invest in a mutual fund scheme according to their income, expenses, investment goals, and risk appetite.
Closing Thoughts
If you intend to invest in mutual funds, you must find the ones with maximum returns. Apart from estimating the returns, you should also determine the maturity period before investing in mutual funds. It will ensure that your investment plans and strategies can help you easily achieve all your financial goals.
