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What Are The Benefits Of Investing In Mutual Funds?

By Author: Bhagath Varma
Total Articles: 12

Mutual funds offer several advantages to individual investors like access to professional fund managers who manage their investments, economies of scale by allowing investors to start with minimum investments of Rs.500 p.m and yet get exposure to a wide variety of asset classes like equities, bonds, international securities and gold. Mutual funds offer a great way to diversify portfolio risk by allowing retail investors access to a variety of securities which they may find difficult to manage on their own.

Mutual funds have become a popular investment choice among retail investors in the recent times. Mutual fund is a type of investment that collects money from a wide pool of investors, to invest in equity, debt and international market securities besides gold basis its stated investment objective. The reasons for their growing popularity are many. Some of the reasons for their popularity are directly linked to the key features and advantages mutual funds offer while the other reasons relate to growing investor education initiatives by various market players and the diminishing lucrativeness of other conventional options in recent times.

Some of the striking benefits of mutual funds arise from the way mutual funds are structured and here is a list of their key advantages:


Since mutual funds are a pooled investment vehicle, they allow you economies of scale. For instance, you can invest in a mutual fund in India through SIP starting with an amount as low as Rs.500 per month. Since mutual funds invest in a wide variety of asset classes ranging from equities, debt, gold, international securities, cash, real estate etc, you get to invest across all these asset classes with a small amount which otherwise would not be possible if you wanted to invest in each of these asset classes as an individual investor. You would need a significant amount of capital to get exposure in each of these asset classes in the absence of mutual funds.

Since mutual funds are managed by professional expert fund managers who have put in years of work in research and analysis of various asset classes and the securities within them, you can rely on their skills to manage the pooled money of your mutual fund.

The best part about mutual funds is they provide a great way to diversify your portfolio. Thus, investing in a mutual fund provides you, as an individual investor, a medium to invest in a variety of securities across equity, debt and international markets which you may otherwise find challenging to invest on your own. This reduces your overall risk which would have been impossible had you invested in any of the asset classes in your individual capacity.

Mutual funds are the most liquid investment options available to investors today. Other than cash and savings bank account, which are anyway not considered as investment options, there is no other option that can offer the kind of liquidity mutual funds can offer while providing great potential for wealth creation over the longer-term.

Mutual funds are best suited for long-term wealth creation and they provide a great variety of option to choose from. Since every investor has a unique profile in terms of his financial situation in life, his willingness and ability to take risk, his financial goals and time horizon, the kind of flexibility offered by mutual funds is like none others. One can invest in lumpsum or in smaller amounts regularly through SIP, one case choose different types of schemes depending on his goal and risk profile, one can choose the time for which he/she wants to invest, there are various modes of investing in mutual funds and the best thing is none of this is case in stone. If circumstances change, you can redeem your investments or change your investment amount or type very easily. Thus, mutual funds offer the greatest flexibility among all investment options.

You can read a lot more on mutual funds on this simple, yet informative site called www.mutualfundssahihai.com. It’s a site meant to educate investors like you and is an initiative of the mutual fund industry body, AMFI. Check it out!

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