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Benefits of Mutual Fund

Benefits of Mutual Fund

We had earlier written that almost all financial Investment available today are in the from of Mutual Funds. Mutual Funds, as we described are basically on OUTSOURCING AGENCY where we give them our money to manage as they are more specialized and they charge a free to manage it.

Now there are certain advantages when we deal with Mutual Funds:

1. Professional investment management

Fund Managers handling your money are those people who have through knowledge and immense experience in the field of financial Market. There is always a team of people who look after investments. There are processes and  research based investment is done both in bond/ Debt and Equity market.  If you were to look at the average return based various Equity Funds and the return generated by overall market, you will find that Fund Managers have done their job well and they have given better return that the overall market in long run.

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2. Diversification

Diversification is needed for the safety and stability of your investment portfolio. Since Mutual Fund is pool money and through this pool, a manager invest in various stock and securities, it gives benefit of diversification to common investor. He/ She just to invest in the common pool and thru this pool, diversification can be done. For Individual investor. it is not possible to have diversification in real sense as the amount of investment is often too small to buy different securities.

3. Low Cost

Going by train is going to be always cheaper than going by your own vehicle. The same rule applies to Mutual Funds as well. Since they deal with huge amount of money pooled by thousand of investor, their cost of handling comes down. Economies of Large scale pulls the cost of handling money to much low levels.

4. Convenience

Investing in Mutual Funds is like 123.

1.Choose a Scheme(Take the help of Advisor here)

2. Fill the form which would take less a minute.

3. Remit a cheque in favor of scheme.

Also after you have invested, the post investment activities like withdrawal, changes etc are much easy to operate.

5. Flexibility

Since the investment in Mutual Funds are denominated in terms of UNITS, there is lot of flexibility that you carry. You think of any permutation and combination of adjustment that you require, it can be done. For example, you can invest in parts, you can withdraw in parts, you can switch in parts to other scheme as well. In fact, there is no flexible investment tool than Mutual Funds available for investors.

6. Liquidity

The investment done in Mutual Funds are always available for withdrawal expect in case of Tax Saving schemes and schemes that carries mandatory lock-in as its feature. the money can be withdrawn or redeemed just by singing a redemption from and , money gets credited to your bank in 1-3 working days.In fact, we keep guiding investor that unless you require tax savings, don’t get into any schemes which locks your money. The fact of the matter is that manufacturer of financial products like insurance etc. comes whith lock- in products more for their benefits or for benefits of agents.

7. Transparency

Transparency is the key benefit of investing in Mutual Funds. You as an investor would know where your money is invested, what is the value of their investment on closure of each working day. The regulator SEBI, has also mandated various other clauses which makes mutual fund investment crystal clear. The charges levied are also clear which is the main concern for most of the investor.

8. Variety

There are plenty of  options available for an investor to choose from. Depending on his time horizon, his needs, his return expectation, he can choose as  per his per his objective. you have option in Debt, Equity , money market, Gold, ETF, International Market and what not   markets.

9. Tax Benefit

Tax benefits on Mutual Funds keep changing time to time. :

  • No long term gain tax on sell of equity mutual fund(long term here means 1 year plus)
  • Tax free dividend
  • No dividend distribution tax in case of equity mutual fund
  • Benefit of indexation in case of debt mutual fund
  • Lower long term gain tax in comparison to any other interest bearing product
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