Mutual investments are the ideal investment vehicle for novice investors. Once the appropriate scheme is chosen, the set financial goal can be met without much hassle. In the most generic sense, a mutual fund gathers money from several investors and in turn invests on their behalf. The only catch is the small fee that’s charged to manage the money which is invested in assets of different kinds such as debt funds etc. The gains and losses are shared alike by the investors in equal proportion.
With the growing awareness among the public, Mutual Funds have risen in popularity over the years. Many avenues and agencies that help the investor to choose wisely and also track the investments at the same time, has caused a sense of security about the concept. We at MAXX Markets feel that though this is a noteworthy change, one needs to be aware of the risks involved. It is important to know that like any investment, big or small, there’s a degree of risk associated. This degree fluctuates every now and then but also can be mitigated. For better understanding the procedure and for latest news you can look up to some trustworthy platforms and sites available like B-Finance.
Let’s take a look at some of the advantages Mutual Funds present over other avenues:
- Simplicity: When one tries to invest, the availability of data is incredibly time-consuming. As far as mutual funds are concerned, the analysis of performance is all that’s needed. Metrics such as risk, return and price are available for comparison. Since all these parameters are easily available, it is easy for an investor to make wise decisions.
- Diversified Investments: MAXX Markets suggests that asset diversification is one man rule for investing, whether big or small. Diversification involves mixing of different types of investments within one portfolio. This helps in managing risk. Mutual Funds provide instant diversification and asset allocation to create individual portfolios. They also do not need large sums of money to do that.
- Liquidity: One of the main advantages of Mutual Funds, though constantly overlooked is the concept of liquidity. Mutual Funds allow for the assets to be converted into cash with relative ease.
- Tax Benefits: Mutual Funds are relatively more tax-efficient than sources. Long term capital gain tax is zero which means that one doesn’t have to pay tax after selling the investment (one year after purchase). Also, the ELSS funds get exemption of upto Rs. 1.5 lakhs under section 80C.
- Professional Management: As the very definition of Mutual Funds suggest, the research and fund allocation required would be done by a fund or asset manager. The fund manager decides on what the investment should be like and whether to hold or invest in debts and equities. Maxx Markets suggest to look into the asset manager’s reputation as the main criteria before proceeding to choose one. The expense ratio includes the manager’s fee as well.
- Frugality: Lastly, when choosing to diversify an investment portfolio it is important to take cost effective measures. To diversify would mean to invest in high and low risk avenues and also to ensure they fit in the financial goal. Mutual Funds cost less to manage a portolio than others.