Investors are often overwhelmed with a number of investment options offered to them. From fixed deposits to gold, money market instruments to gold, equities and a combination of these, each set of securities having their own benefits. One of the most popular investment options among investors is mutual funds.This article will explain the top benefits of investments in mutual funds.
Why should you invest in mutual funds?
Following are some of the benefits of investing in mutual funds:
- Helps to create a diversified investment portfolio
Mutual funds invest in two primary asset classes, namely, equity and debt asset class. The primary benefit of investing in mutual funds is that your investments are exposed to a variety of equities and fixed income instruments. Owing to the diverse nature of the portfolio, if a few securities incline to underperform, then other securities will compensate for your losses. You would be well-versed with the adage – “Don’t pull all your eggs in one basket”. It holds true for mutual fund investments as well.
- Easier to start
If you wish to invest in the markets, mutual funds can be your go-to investment option. To invest in mutual funds, all an investor needs is a bank account and their Permanent Account Number (PAN) card details. One must keep in mind that it’s not mandatory to have a DEMAT account to invest in mutual funds.
- Offers high liquidity
High liquidity is one of the key reasons why the mutual funds’industry attracts a high customer base. If an investor chooses to invest in open-ended funds, they are free to sell or buy units any time as per their convenience. This helps the investor during a financial crisis, as they can easily liquidate their investments to save themselves from the distress situation.
- Reduces your tax liability
If you are looking for tax saving funds, you might consider investing in ELSS (Equity-linked Savings Scheme). ELSS mutual funds are one of the most popular mutual funds for tax saving. Investments in ELSS funds are eligible for a tax deduction of up to Rs 1.5 lac p.a. under section 80C of the Income Tax Act, 1961. You can save up to Rs46,800 by investing in these tax-saving mf. ELSS funds offer the dual benefits of tax saving and capital appreciation.
- Potential to earn significant returns
As mutual fund investments are subject to market risks, they have the potential to earn substantial returns if the markets work in your favour. Equity mutual funds have historically offered substantial returns around 14-16% when invested for a long period of time.
One of the primary features of mutual funds is that you do not require any prior knowledge or expertise in the equity markets. This is because your funds are managed by an expert known as a fund manager who offers peace of mind to the investor by choosing the best investment options for their portfolio. So, what are you waiting for? Invest in mutual funds online now. Happy investing!