Mutual funds may not only bring in better risk-adjusted returns but may also cut costs.
Why bring in someone to do something for you when you can do it yourself – asks common sense. If you can buy and sell shares, bonds and gold, then why invest in mutual funds? Are there any benefits of investing in mutual funds? Do they pose a good investment strategy? Let’s look at the advantages of investing in mutual funds:
Economies of scale
One of the core advantages of investment in mutual fund is the extensive growth potential. Since mutual funds are collectively invested in a specific group of companies, usually per industry; the growth potential is enormous. Similarly, as several investors come together and pool in large sum of money, mutual funds offer economies of scale. If you try to access these services as an individual, the costs could be prohibitive.
Professional management
When you invest in a mutual fund, you can avail services of investment professionals known as fund managers. Every fund has a team that tirelessly works on ensuring that the investment value is maximized while ensuring that the risk factor is constant and enduring. The best brains are at work to grow your money.
Portfolio diversification
Have you been to a nice restaurant offering many mouth-watering dishes? When you are alone, you can order one or two. But think of a day when you go there with your friends and you can try ten such dishes when each one orders a different dish. If you buy even one stock for each of the index's constituents, not only will it be time-consuming, but you will also have to spend a lot of money. But through an index mutual fund, you may own a well- diversified portfolio of stocks even if you are investing a small sum as low as Rs 1000.
Wide range of choices
As all of us have different needs, we need different solutions. Mutual funds offer us a wide variety of investment options that invest across shares, bonds and commodities like gold. Right from liquid funds that make the best parking space for your money in the short term, to diversified equity funds which are great long term wealth creation machines; you may choose funds as per your needs.
You can invest lumpsum or you can opt for a Systematic Investment Plan (SIP) - invest at regular intervals – daily, weekly or monthly. You can also choose to remain invested for a day or for your lifetime. Start with Rs 5 lakh or Rs 500. You get to decide if you want to walk or run towards your goals.
Liquidity
This can be the deciding factor, though not many mutual fund investors consider this to be a critical aspect. Have you come across anyone telling you that he is in dire need of money and can’t sell any of his properties at the right price? That is liquidity – quickly selling your investments at the right value and getting your money back when the need arises. Mutual fund offers the chance to withdraw the investment at a fair value as per the scheme’s rules. The money is credited to the linked bank account within 3 working days as per SEBI guidelines.
Income tax benefits
Mutual funds fetch you tax benefits – when you invest in an ELSS (Equity Linked Savings Scheme), you can avail deduction up to Rs 1.5 lac every financial year under Section 80C of the Income Tax Act, 1961. To further sweeten the deal the capital gains enjoyed on the mutual fund investments get much lenient tax treatment as compared to interest income.
Transparency & regulation
The Securities Exchange Board of India (SEBI) regulates mutual funds, prescribes best practices, and has put in place a regulatory framework that nurtures investors’ interests.
Mutual funds declare the net asset value & holdings of each scheme periodically. Mutual funds are also expected to share key information about the scheme such as investment objective, investment policy and past record with investors at regular intervals. Simply put, the regulator strives to ensure you remain in charge of your investments and take more informed decisions.
Mutual funds make investing convenient and simple. You can generate wealth and achieve your financial goals without compromising your leisure time and peace of mind.
Disclaimer-
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
To know about the KYC documentary requirements and procedure for change of address, phone number, bank details, etc. please visit https://www.utimf.com/servicerequest/kyc. Please deal with only registered Mutual funds, details of which can be verified on the SEBI website under "Intermediaries/market Infrastructure Institutions". All complaints regarding UTI Mutual Fund can be directed towards service@uti.co.in and/or visit www.scores.gov.in (SEBI SCORES portal). This material is part of Investor Education and awareness initiative of UTI Mutual Fund.