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Why Should You Invest in a Mutual Fund?
A balanced, systematic, and disciplined way of investing
A mutual fund is a monetary instrument that collects, pool, and invest the money of an audience into a combination of securities like equities, debts, and hybrid.
An investor holds “units” of the mutual fund which represents his fair share of holdings in the mutual fund scheme.
Fund managers are appointed by Asset Management Companies (AMCs) to oversee your portfolio for which a minuscule amount is charged from you in the form of an expense ratio and exit load.
Advantages of Investing In Mutual Fund
1. A risk-free portfolio
One of the significant concerns that follow investing is the risk factor. The stock market is a double edge sword; If you can win big, you can lose big too.
But, what If you want to invest, and earn good returns while keeping a low-risk profile?
The answer to the above question is diversification, and mutual funds are perfect financial instruments as they invest your money in several securities across multiple sectors. A portion of your money will be invested in equity, and another portion will be invested in securities having low risk and reward.
Therefore, when the market tanks or turns bearish, your diversified investment helps you absorb the shock while keeping the rate of return intact.
If securities in one sector plummet, the securities in the other sector will keep producing good results.
2. Small capitals are enough
Building a diversified portfolio not only includes investing in multiple securities but also calls for investing relatively large amounts to earn a good share of return.
Unsurprisingly, retail investors do not have and also don’t want to invest a huge amount in financial securities.
That’s where mutual funds come into the spotlight. You can either invest a lump sum amount in coordination with your fund manager or can start a Systematic Investment Planning ( SIP ) by investing a pre-determined amount every month.
