Why Should You Invest in Mutual Funds?
Mutual funds are considered to be one of the most popular investment options these days. It’s an investment facility formed when an asset management company (AMC) or fund house pools investments from several individuals and institutional investors with common investment objectives. in this blog, we are going to discuss “Why Should You Invest in Mutual Funds?”
Investment Handled by Experts
A financial expert is known as fund manager Managers the total cumulated investment. Moreover, fund managers are supported by analysts and experts who pick the best-performing stocks and assets that have the potential to make excellent profits for investors.
No Lock-in Period
The lock-in period is a timeframe over which the investments once made cannot be withdrawn or simply says it is the maturity period. Most of the mutual funds come with no lock-in period. Most mutual funds are open-ended, and they come with no exit load.
It is suitable for small investors as MFs comes at a low cost. The asset management companies (AMCs) levy a small amount which is referred to as the expense ratio on investors to manage their investments. It generally ranges from 0.5% to 1.5% of the total amount invested. The Securities and Exchange Board of India (SEB) has mandated expense ratio to be under 2.5%.
Systematic Investment Plan
Systematic Investment Plan commonly referred to as a SIP is a mode of investing in mutual funds. SIP is simple where you can invest a certain predetermined amount of money in a Mutual Fund over a period of time. The investment frequency is usually weekly, monthly or quarterly. In SIP, a fixed amount is deducted from your savings account periodically and invested in a specified mutual fund that you choose to invest in.
Switch Fund Option
If you would like to move your investments to a different fund of the same fund house, then you have an option to switch your investments to that fund from your existing fund. A good investor knows when to enter and exit a particular fund. In case you see another fund having the potential to outperform the market or your investment objective changes and is in line with that of the new fund, then you can initiate the switch option.
Mutual funds provide fund plans that help investors achieve all their financial goals, it may be short-term or long-term. There are mutual fund schemes that are suitable for every individual’s risk profile, investment horizon, and style of investments. Therefore, investors need to assess their profile carefully so that they pick the most suitable fund plan.
Unlike stocks, mutual funds invest in various assets and shares of several companies, thereby providing the benefit of diversification. Also, this alleviates the risk of concentration. If one asset class fails to perform up to the expectations, then the other asset classes would make up for the losses. Therefore, investors need not worry about market volatility as the diversified portfolio would provide some stability.
The above mentioned are some of the advantages of mutual funds and there are lot more which makes it one of the most popular investment options nowadays.