Reasons Why Is It Profitable To Invest In Mutual Funds
Mutual fund can be formed when the capital collected from the investors gets invested in the company shares, bonds or stocks. Shared by plenty of investors (that includes
you), the mutual fund investment is collectively managed to earn the best possible returns. A person driving such investment vehicle is the professional fund manager. You
need to know the basics of mutual funds before you look for how to invest in mutual fund.
Mutual fund is-
- Money pooled from different investors
- Managed Professionally
- Access to big portfolios
- Allows investing in small sum
- Higher returns compared to conventional investing
Looking at Some Advantages of Mutual Fund Investment
Investors or individual turn to buy mutual fund due to four distinct benefits they will offer on investing in the individual securities.
1. Diversification — Purchasing shares in the top mutual fund is one simple way of diversifying your investments across several securities. This is a way to say that you can’t have all eggs in just one basket. Suppose one investment reduces in value, and another investment in your portfolio might increase.
2. Professional Management —The mutual fund provides investors an access to the full-time and professional fund managers who have got the expertise, resources and experience to buy, sell or monitor the Fund investment.
3. Liquidity — Most of the mutual funds will allow you to sell your shares at any day provided the stock market is open. Thus, one has simple access of his/her money. Obviously, your shares value, when redeemed, can be worth more or less than the original cost.
4. Affordability — For some people, it becomes expensive to buy directly all the individual securities that are held by the single mutual fund. Thus, minimum investments for most of the mutual funds are quite affordable.
Mutual funds investment is an easiest way to increase your wealth. For this reason, fund manager’s expertise is an essential factor to consider. The mutual funds are very
safe, as they are registered with the Securities Exchange Board India or SEBI.
Different Types of the Mutual Funds to Invest In
Best mutual funds generally come in different forms, and made to meet all types of investor goals. Majority of the mutual funds fall in four categories:
Primarily, invests in the bonds and other debt securities, gives investors the complete potential for capital preservation and income generation.
Invests in stocks and can focus on some market sectors or have the specific style of investment.
Invests in various asset and strategies classes, and provide complete potential to decrease volatility and boost your portfolio returns.
Primarily offers an exposure to a wide variety of asset classes, and offering the level of diversification associated with the institutional investing.
Why To Go For Mutual Funds?
This period generally differs for each mutual fund. Right from a month to nothing at all. Longer your holding period better will be the returns and vice versa.
Expert Money Management
A single investors might not have time and professional expertise to choose which is the best mutual fund to invest or how. The mutual fund company hires professional managers who can manage this money pooled in the funds.
Suppose you don’t want to make one-time investment, invest in the smaller and the manageable installments SIP. The Systematic Investment Plans or SIP promotes financial discipline among the investors.
The mutual funds are quite affordable investment choice for the people who don’t have want to make the big initial investment. The fund houses will charge a very nominal fee,
known as expense ratio. It ranges from 0.5% - 1.5%, and can’t exceed to above 2.5% according to SEBI regulations.