Mutual fund Investment, a term, you must have heard about many times on television, in advertisements, on the internet, but are you aware of its significance? If not, no problem, through this blog you will get to know why Mutual Fund Investment is the best choice for an individual's future investment plan.
Mutual Fund Investment, you can consider is a financial structure where multiple investors, whether individual or community or any institution invests their money in a collective manner which is used to buy securities such as bonds, stocks, and other assets. This whole financial Structure is managed by professional and certified Mutual Fund companies (Asset Management Companies).
Mutual Fund can also be defined as an investment medium including varied and professionally managed portfolios that give an investor diverse choice to avail portfolios at a low cost of investment.
Mutual Fund is a kind of investment, which is regulated by several Mutual Fund Investment Companies present in the market. Let’s get clarified by an example. Hari, a businessman, bought stocks in Nokia Company, now he is a part-owner of the company assets. Similarly, if Hari would invest in mutual fund through Shri Ashutosh Securities Pvt. Ltd., a mutual fund investment company, then he would be buying part ownership in AMC’s mutual fund scheme and its underlying assets.
In Mutual Fund, as stated before numerous investors pool their money in mutual fund companies, which in return invests these amounts of money in purchasing bonds or stocks. Mutual Fund companies aim to invest the investment amount in good return yielding assets so that its investors can attain gain in returns generated. A very small part of the benefit generated is kept by the company and the rest is administered equally among its respective investors. The process of mutual fund investment is shown in the image below:
As of now, you understood what is mutual fund investment, know what are the benefits of investing in Mutual Fund? Advantages of Mutual Fund Investment:
1.Diversification: To reduce the risk in investment and increase the return yield from the assets, investors are suggested to go for diversification in their investment. Investors are implied for buying mix stocks from different industries or different types of investments that reduce the risk of investors' assets.
2. Liquidity: Mutual Fund is subjected to long term investment, but it is fragile. It means that any investor, investing in mutual funds, faces any drastic situation in the midterm only, then he/she can easily withdraw their units of a mutual fund from the market. In that situation, the returns generated would be calculated based on the current market value of the asset purchased. You should also know about the best part of this advantage that is, there is no age bar fixed to start your investment in the mutual fund. It depends on an investor when he/she wants to invest, from our point of view, to generate high returns, started earning, start investing, that too early!
3. Professional Fund Management: When you invest, you invest your money, your hard work. You are wise enough to decide why there is a need for a professional money manager that plans the investment of an individual's fund as per his/her investment objectives. Professional, after good analysis, chooses the best asset to be purchased that can generate high yield on returns. Besides this, any investor related to any profession, whether engineer, doctor, businessman or serviceman, doesn't have much time to have a regular check on the market value. So the best option is to go with the professional fund manager for your investment plan.
4. Small ticket size: At its beginning, mutual fund investment idea was rejected by many as it required a big amount of money for at a time investment. After upgradation in Mutual Fund policy, it’s an investor's choice whether he/she chooses SIP policy or lumpsum amount policy for their investment plan. The commendable part of this advantage is, why to wait for a bigger saving for your mutual fund investment, started earning, start investing small but regularly.
5. Systematic/Regular Investments: Some mutual fund investments are not subjected to at a time payment, instead investors can go through Systematic or Regular Investments. For example: Through SIP or Systematic Investment Plan, investors can either opt monthly, quarterly or yearly installment payments. Below is the image, it has been shown about SIP investment of Rs 1000 per month for a different period, have excellent yields at its maturity:
6. Tax Benefits: Through investing in Equity Linked Saving Schemes (ELSS) of mutual funds, investors can also save their tax under the guidelines of section 80C for the financial year 2018-19.
In market Mutual Funds are highly qualified as the best option for investment as it puts the low-cost burden on the pocket of an investor, along with that it commands the best return class of the market.
Beneficial keys for Mutual Fund Investment:
- Mutual fund investments include risk, to overcome these risks investors need to maintain their patience.
- Investors should choose long term investment plans that can generate high benefits, which also reduces the risk of loss.
- If choose SIP investment, maintain your regularity in paying your installments to preserve your investment from getting ceased.
(Mutual Fund investments are subject to market risk. Kindly read all the related documents carefully before investing. Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns)