Why it is Important to Invest in Mutual Funds?

Why it is Important to Invest in Mutual Funds

Investing money in mid to long term schemes is always important because these schemes deliver you better returns on your investment and they are pretty much stable. Mutual funds are the best option for stable returns on your investment and investment in mutual funds keep you secure from market fluctuations.

Mutual funds maintain a diversified portfolio. It invests your funds in both debt and equity market which allows you to get the best possible returns from both markets. There is a wide number of mutual funds schemes are available which allow every investor to choose a plan according to its investment goals.

Investor from every type of financial background can invest in mutual funds and mutual fund investment can be started with just thousands rupees.

Below we are sharing some important facts that why you must invest in mutual funds

Diversification of portfolio – Diversification of your investment is necessary to reduce risks and it enables you to get maximum returns on your investment. These funds invest your money in multiple options such as bonds, equity and debt which reduce the chance of losing money. If your money is invested in the single market it makes your investment vulnerable because if that market crash than you also suffer financial loss but in mutual funds, your money is invested in multiple markets even if one market crash still you recover your loss from other markets.
Diversification of investment divides the risks and keeps you secure from market fluctuations.

Bring financial stability – When you invest your money in long term schemes like mutual funds it brings a lot of financial stability in your life. A mutual fund offers you monthly income plans (MIP) which offers you stable monthly income on your investment. If you invested a certain amount of money in monthly income plan than it will give you fixed monthly income on your investment. The fixed income per month brings a lot of financial stability in your life because you can use that money for your personal expenses or other family expenses.

Wide range of schemes – When it comes to investment every investor has different goals and plans regarding investment. Mutual funds have schemes for every investor as per their financial goals. Mutual funds have various schemes based on their duration, mutual funds offer short, mid and long term investment plans so investors have the option to choose short, mid and long term schemes.

If we talk about risk tolerance and volatility in investment, every investor has different goals and opinions. Some investors only want to invest in stable and secure plans to avoid volatility for those investors debt funds are suitable because debt funds are the least risky. Debt funds provide secure returns although profit margin in debt funds is limited.

These funds also offer balanced or hybrid plans which are moderate risky because these plans contain equity investments. The equity market has volatility but at the same time, balanced funds also have a very good risk to reward ratio. These plans have moderate risk but at the same time equity portion of balanced funds can provide higher return because of volatility.

And also have equity-oriented schemes where the majority of funds are invested in the equity market and equity-related instruments. Equity oriented funds are risky but they have the potential to provide large profit.

If you are looking to invest in mutual funds surely within a wide range of investment plans, you can find a suitable plan as per your goals.

High liquidity – Sometimes situations come when you urgently need money, For example, you want to buy something which very important, marriage expense or any kind of medical emergency in all these situations you urgently need money. These funds are highly liquid whether you invested in open-ended funds or close-ended funds you can exit from your investment scheme anytime and money can be available in your bank account within 48 hours so you can spend it on an emergency purpose. Liquidity is always an important factor in investment and mutual funds offer high liquidity.

You can start with a small amount – Any type of investment requires a lot of money to start your investment. For example, you buy land as investment its requires lakhs of rupees or if your invest in the stock market it requires thousands of rupees plus a demat account to begin your investment but in mutual funds, you don’t need a large amount of money or demat account.

You can begin your investment with just 500 rupees a month and if you wish you can invest more money because there is no upper limit. Students or peoples with low income can also invest in mutual funds because a person can begin with very little investment.

Cost-Efficient – Investing in mutual funds is very cost-efficient and it can save a lot of money. If you buy equity shares directly via brokerage firms than you have to pay brokerage and security transaction tax (STT) but when you invest in equity via mutual funds it is cost-efficient. These funds invest in bulk quality and they do bulk transactions so they have to pay low brokerage charges which ultimately benefit investors.

Conclusion

Mutual funds investment can be considered one of the best investment option. Mutual funds schemes have very little chance to lose money at the same time it offers a wide range of investment plans on basis of time duration and diversification. Peoples from low to the high earning background can invest in these funds because there is a plan for everyone.

Have a happy and safe investment!

Team R Wealth

Team R Wealth

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