A Mutual Fund scheme is a type of financial instrument that is created by pooling money from many investors. AMCs are mutual fund companies that invest in securities such as company shares, bonds, stocks, debts, and other assets. These open-ended investments are managed by AMCs. Mutual fund companies invest their funds in a variety of securities. This assists its investors in increasing their wealth through their investments. The income or gain from these investments is then distributed to the investors. The distribution is made after deducting certain expenses and calculating the scheme’s Net Asset Value.
Mutual funds are a higher-risk investment, but the returns are generally higher than in any other investment strategy in stock market. Any investment plan, whether short or long term, has its own set of advantages. Because of risk management, most investors prefer to invest in mutual funds. The advantages of investing in mutual funds are as follow:
- Liquidity: The most significant advantage of investing in a Mutual Fund is the ability to redeem units at any time. Mutual Funds, unlike Fixed Deposits, allow for flexible withdrawals, but factors such as the pre-exit penalty and exit load must be considered.
- Diversification: An investment’s value may not rise or fall in lockstep. When the value of one investment rises, the value of another may fall. As a result, the overall performance of the portfolio is less likely to be volatile. Diversification reduces the risk involved in constructing a portfolio, lowering the risk for an investor even further. Because Mutual Funds are made up of many securities, investors’ interests are protected if other securities suffer a decline.
- Expert Management: A novice investor may lack knowledge and information about how and where to invest. Mutual funds are managed and operated by experts. The experts collect money from investors and invest it in various securities, allowing the investors to profit. The expert monitors the time of exit and entry and handles all challenges. One only needs to invest and rest assured that the rest will be handled by experts in this field. This is one of the most significant benefits of mutual funds.
- Flexibility to invest in Smaller Amounts : The most important benefit of Mutual Funds, among others, is their flexibility. Investors do not need to put up a large sum of money to invest in a Mutual Fund. Investment can be made based on the cash flow situation. If you receive a monthly salary, you should consider a Systematic Investment Plan (SIP). SIP invests a fixed amount on a monthly or quarterly basis, depending on your budget and convenience.
- Accessibility – Mutual Funds are Easy to Buy: Mutual funds are widely available, and you can begin investing and purchasing mutual funds from anywhere in the world. Asset Management Companies (AMCs) offer and distribute funds through a variety of channels, including brokerage firms, registrars such as Karvy and CAMS, AMCs themselves, online mutual fund investment platforms, agents, and banks. Because of this factor, mutual funds are widely available and easily accessible. Furthermore, there is no need for a Free Demat Account opening to invest in Mutual Funds. Mutual funds are simple to purchase, track, and invest in with a single click using Clicqndtrade.
- Safety: With the implementation of SEBI guidelines, all Mutual Fund products have been labelled. This means that every Mutual Fund scheme will be color-coded. This allows an investor to determine the risk level of his investment, making the entire investment process transparent and safe.
- Cost effective: A Mutual Fund collects funds from a large number of investors and uses them to purchase securities. These funds, on the other hand, are invested in assets, allowing one to save on transaction and other costs when compared to a single transaction. The savings are passed on to investors in the form of lower mutual fund investment costs. Furthermore, the Asset Management Services fee is reduced and distributed among all investors.
- Efficient tax saving instrument: Mutual funds are the best way to save money on taxes. Section 80C of the Income Tax Act provides a tax exemption of Rs. 1.5 lakh per year for ELSS Mutual Funds. In India, all other mutual funds are taxed based on the type of investment and the duration of the investment. ELSS Tax Saving Mutual Funds have the potential to outperform other tax-saving instruments such as PPF, NPS, and Tax Saving FDs.
- Lowest Lock-in Period: Tax Saving Mutual Funds have the shortest lock-in periods, which are only three years. This is less than the maximum of 5 years for other tax-saving options such as FDs, ULIPs, and PPF. Furthermore, one has the option to remain invested even after the lock-in period has expired.
To achieve their financial goals, one must go through a number of processes, which may be difficult for a new investor. Clicqndtrade ensures that our investors meet their financial objectives. We make certain that our esteemed investors’ investing journeys are smooth and trouble-free. Mutual funds are simple to purchase and track with Clicqndtrade.