Before considering to invest in mutual funds online, it is important to understand what is a mutual fund. A mutual fund is an investment that pools money acquired from several investors and is managed by a professional fund manager. Mutual funds can invest in equities, bonds, stocks, cash, money market instruments, and various other securities. You might have wondered at times, “Should I invest in mutual funds?” In this article, we’ll list the top 6 reasons why you should invest in mutual funds.
Why Invest in Mutual Funds?
There are several benefits to investing in mutual funds. Some of them are:
- Professional management
Mutual fund investments are professionally managed by experts known as fund managers. Their daily job is to track the markets and manage the investments. They identify winning investments, buy them at the right time, and most importantly, know when to exit.
- Higher returns
This is the basic objective of any investor. Mutual funds are the right avenue for investing in various market-linked instruments that have continuously yearned superior returns than traditional investment options.
- Disciplined investing
It’s an excellent habit to invest for a secure future. When you start a Systematic Investment Plan (SIP), you are committed to investing a specific amount periodically. This instils in you the discipline required to take productive steps and plan for a secure future.
You must be well-versed with the adage – “Don’t pull all your eggs in one basket”. This is true for mutual fund investments too. This is the premise of diversification. It means spreading your investments across various stocks and asset classes to mitigate possible losses. Consult a mutual fund expert to understand how to balance your portfolio by selecting the ideal mutual funds for your investment goals.
- Tax-saving advantages
Apart from capital appreciation, ELSS mutual fund investments offer tax benefits to its investors as well. Under Section 80C of the Income Tax Act, 1961, if you invest Rs1.5 lakh in Equity-Linked Savings Schemes (ELSS), you can save up to Rs46,800 each financial year.
Investing in mutual funds has become a piece of cake. The whole process is now offered online by various players. You can also track the performance of your portfolio with a few clicks.
Mutual funds have the potential to yearn higher returns depending on your risk appetite. However, since mutual fund investments are subject to market risks, it is advised that you choose a fund after considering your investment horizon, investment goals, and risk appetite. You can always consider taking guidance from mutual fund advisors before you start to invest in mutual funds online. Happy Investing!