3 Major Reasons to Invest in Mutual Funds..!

3 Major Reasons to Invest in Mutual Funds..!

After demonetisation in November 2016, many investors are using mutual funds as a preferred vehicle to route their savings into the financial markets.

ET tells you why mutual funds are good investment options and what their advantages are.

1. Is there a mutual fund product that will match my requirements?

Mutual funds have various product catego ries -from liquid funds, in which investors can invest from as little as a day, to equity mutual funds where one can stay invested for an infinite period of time.

Financial planners advise investors to choose products, such as liquid funds, debt funds, balanced funds, arbitrage funds, equity funds and sectoral funds, depending on their time frame, goals and risk profile.

2. What flexibility of investments do mutual funds offer?

Mutual funds are one of the most liquid products among all financial instruments. In liquid or short-term debt products, once a redemption request is placed with a fund house, money comes into your bank account in a maximum of two working days.

In fact, some funds houses allow instant redemption of up to Rs. 50,000 from liquid schemes. In equity funds, it takes a maximum of four working days for the money to return to your account.

Also, there is an option to make a onetime or lumpsum investments, or you could stagger your investments over a period of time using systematic investment plans (SIPs) or systematic transfer plans (STPs). These are automated and money is debited from your account at a pre-specified frequency .

3. What advantages do MFs offer compared to direct equities?

Mutual funds offer diversification. Unlike equities, where you may hold a single stock, a mutual fund has a diversified portfolio al fund has a diversified portfolio where you hold a basket of securities.

Sudden changes in the price of a single stock are likely to be balanced out by the performance of other stocks in the fund, thereby minimising your risk and optimising your returns. When you buy a mutual fund, you are also choosing a professional money manager.

This fund manager and his team of analysts are qualified to research the economy and stocks. The fund manager will use the money you invest to buy and sell stocks that he or she has carefully researched. 

Therefore, rather than having to thoroughly research every investment before you decide to buy or sell, you have a fund manager do the job and handle your investment.

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