Advantages of Investing in Mutual Funds

The earlier post in this series on mutual funds, gave you a good insight into where to invest your money! Here let us discuss what the advantages of investing in mutual funds are. Well like everything, these do come with their own sets of disadvantages but we will keep this post restricted till the the advantages only and these are outlined below:

1.       Diversification of Portfolio

Well as we had been saying and you must be knowing out of practical experience, putting all the eggs in the same basket is not only risky but very risky. And this is why mutual funds give you the benefit of srpraedinng of risk.  When investing in a single stock, you run the risk of losing it all in case of poor performance of that particular stock . Investment in mutual funds however ensures that you are putting money in different stocks at the same time. So your risk element is minimized.

2.       Professional Management

It is a well known thing that investment decisions demand skills. Analyzing the market dynamics and forming a decision to make your money pay you dividends, is an art that is known to professionals who are skilled in this aspect. And since mutual funds are managed by investment professionals, you are spared of the onerous task of forming your own impression about the market.

3.       Liquidity

Liquidity is one of the best features of mutual funds. Unless, has been mentioned in the offer document, you can redeem your units whenever you wish. Nowadays, the funds are integrated to your bank account. As such money get credited to your account within a days time.

4.       Ease of Process

If you have a bank account, a PAN number and money to invest, you are ready to invest in mutual funds. Just give a call to any AMC and an executive will be at your doorstep to collect your investments! Can you think of anything easier than this?

5.       Regulated by SEBI

Mutual Funds are regulated by the Securities and Exchange Board of India ( SEBI), which helps provide comfort to the investors. Sebi requires the mutual funds to disclose their portfolios at least six monthly, which helps you keep track whether the fund is investing in line with its objectives or not. So if you think, you will be kept in dark about your money transactions, you are mistaken.