Invest in best mutual fund

A mutual fund is formed when capital collected from different investors is invested in company shares, stocks or bonds. Shared by thousands of investors (including you), a mutual fund is managed collectively to earn the highest possible returns. The person driving this investment vehicle is a professional fund manager.

Investing in mutual funds is the easiest means to grow your wealth. This is why the fund manager’s expertise (thereby the fund house’s reputation) is an important factor to consider. All mutual funds are registered with SEBI (Securities Exchange Board of India) and therefore, quite safe.

Why Mutual Funds

Mutual funds offers various features and benefits as an investment method, hence

making it the most lucrative investment option.

·         Expert Money Management

Individual investors may not have the time or professional expertise to decide which fund to invest in or how to. A mutual fund company employs professional managers to manage the money pooled in their funds. They decide which company share, sectors/stocks or debt papers to invest the money or whether to hold on to the capital. Their decisions will be in the investors’ interest.

·         Lock-in Period

Lock-in periods differ for every mutual fund. Starting from one month to none at all. For instance, ELSS is a tax-saving mutual fund scheme with the shortest lock-in period of 3 years. The longer the holding period (beyond the mandatory lock-in), the better returns you earn and vice versa. Open-ended mutual funds generally do not have lock-in periods and you can close/withdraw them anytime.

·         Low Cost

Mutual funds are an affordable investment option for people who do not have wish to make a large initial investment. Fund houses charge a nominal fee, called expense ratio, that ranges from 0.5% to 1.5%, and cannot exceed 2.5% as per SEBI regulations. They deduct the expense ratio from the money you invest. Investors bear the transactional expenses proportionately.

·         SIP option

If you do not wish to make a one-time investment, you can invest in smaller and manageable installments called SIP. Systematic Investment Plans foster financial discipline in investors. As it averages the rupee cost, SIP is an ideal alternative to mid-income and low-income investors. You can start with as low as Rs. 500 to make your initial installment.

·         Flexibility to switch funds

A serious investor (or fund manager) knows when to switch from the current fund to another to keep up with or stay ahead of the market. There are many mutual fund schemes that allow this. The asset manager has to keep a sharp eye on the market to know this. This ensures better returns while not getting burned by market volatility.

·         Investments based on goals & focus sector

Every investor has a financial goal. It could be a short-term goal such as an international holiday or a long-term goal like fixed income post retirement. Also, different schemes focus on different assets and outcomes with varying risk factors. This allows investors to drive money to various asset classes as per their risk appetites and goals.

·         Diversification

Mutual funds invest across assets, company sizes and shares to spread the risks. When one underperforms, the other gains can even out the loss. This is diversification. However, it is recommended to not invest in too many (more than 5) as it may get difficult to monitor. Also, stocks of these companies always tend to be homogeneous, which beats the purpose.

·         Flexibility in terms of tenure

Most mutual funds don’t have time constraints unless specified otherwise. ELSS, tax saving fund is the only mutual fund that comes with a minimum lock-in period of 3 years. This gives investors ample flexibility in terms of their financial goals, whether short-term or long-term. Investing for a certain term also makes it easier to plan when and how to invest and investment horizon.

·         Liquidity

Mutual funds are completely liquid investments. You can redeem your invested money any time you want. There is no need to justify your decision or hunt for a buyer. Simply place a request with your fund house, and get the money credited to your account in 2-3 working days.

·         Spoilt for choice

There are different types of mutual funds based on investment goals, individual risk appetite, sectors and fund size among others. However, it can be a tiring task to do the research and analysis.

·         Painless trading & transaction

Buying, selling and redeeming a fund at the current market price per unit (NAV) is quite simple. All you need to do is put in a request with the fund company and the fund manager will take care of the rest. With its easy liquidity, mutual funds can serve as your emergency funds.

·         Tax-Efficiency

Mutual fund (ELSS) has historically generated superior returns compared to the more traditional 80-C options like FD, PF etc. Budget 2018 re-introduced tax on long-term capital gains exceeding Rs. 1 lakh. This amendment on LTCG only applies to equity and equity-oriented schemes. However, due to the higher returns, capital gains on ELSS will still be more.

·         Safe & secure in every sense

All mutual fund companies are under the purview of the government body, SEBI (Securities Exchange Board of India) and AMFI (Association of Mutual Funds in India). It is as safe as putting money in a bank.

·         Easy to monitor & make informed decisions

Investors may not have the time or knowledge to analyze the performance of mutual funds in an objective manner. This is why fund houses provide investors with regular statements, making it easy for investors to track their earnings from mutual funds.