The Key Advantages of Investing in Mutual Funds

 Advantages of Mutual Fund Investment

In simple terms, Mutual Fund is nothing but a pooling of money collected from Investors by issuing units to them. That money is invested in marketable securities according to the investment objectives of the mutual fund. 

In other words, It is a Trust collecting money from several investors with a common investment objective. Then, it invests the money in equities, bonds, money market instruments, and other securities. Each investor owns units, which represent a portion of the holding of the fund. 

Advantages of Investing in Mutual Funds : 

• Professional Management : 

Fund managers are experienced professionals who actively manage the fund, making informed decisions on behalf of investors. 

• Diversification:

 By pooling money from multiple investors, mutual funds can invest in a wide range of securities, reducing the risk associated with investing in individual stocks or bonds.

• Convenient Administration : 

Mutual funds simplify the investment process with straightforward and automated reinvestment options. Thus mutual funds save our time and make investing easy and convenient.

• Low Transaction Cost : 

When Compared to direct investment in the capital market, mutual funds cost less. This is due to savings in brokerage cost, demat cost, depository cost, etc. 

• Choice of Scheme :  

Mutual funds provide investors with various schemes having different investment objectives. Investors have the option of investing in a scheme that suits their financial goals. 

• Transparency : 

Investors get regular information on the value of their investment in addition to disclosure on specific investments made by the scheme, the proportion invested in each asset class, and the fund manager's investment strategy and outlook. 

• Flexibility : 

Through Features such as SIP, Systematic Withdrawals Plan (SWP), and Dividend Investment Plans, one can systematically invest or withdraw funds according to his needs and convenience. 

• SEBI Regulated Market : 

The Mutual Fund industry is part of well - regulated investment environment where the interest of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced. 

• Liquidity :  

An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid and can be redeemed at their NAV.