Benefits of Investing in Mutual Funds in India

 

(Photo: Bank Bazar)

Investment in any form is considered to be the best way of achieving additional income. It’s like waiting for an extra reward. One such word with which we all are familiar is “equity mutual funds”.There’s a large structural growth in equity mutual funds for Indian industries.  The Indian Mutual Fund AUM/GDP ratio currently stands at 12% vis-à-vis the global average of 60%.

India has seen a significant growth rate in equity mutual funds investment. Indian investors are usually keen on investing in equity mutual funds because of the risk management. Investing in mutual funds has many advantages. Let’s discuss them briefly. 

•       Return:  Mutual funds involves higher risk but generally the return that it gives is greater than in any other investment plan.
• Ø  Professional Management: Even a person who does not have professional knowledge can invest. They are assured by the experts. The experts manage and operate mutual funds. They allocate it in different securities thereby assuring them profit.
• Ø  Flexibility in Investment amount: There’s no fixed amount to be invested. You can invest even with a minimal amount of Rs 100. This is the most important benefit which the investors get in equity mutual funds.
• Ø  Liquidity: This is also another benefit of investing in mutual funds. It’s not like fixed deposit where you are unable to withdraw amount at any point. You can redeem it at any point. Mutual funds have flexible withdrawal.
• Ø  Safety & Transparency: All the equity mutual funds have now become safe and transparent after the introduction of SEBI guidelines. They’ve a color coding through which the investors can assess the risk level.
• Ø  Diversification: Diversification is another factor which reduces the risk involved in building a portfolio.  Mutual Funds consist of many securities, so investor’s interests are safeguarded if there is a downfall in other securities purchased.
• Ø  Accessibility: Mutual Funds are easily accessible. By accessibility, it means that you can buy mutual funds from anywhere in the world. You don’t require a Demat account for it. Mutual funds are very easy to buy.
• Ø  Lower cost: In Mutual Fund, funds are collected from many investors, and then the same is used to purchase securities. These funds are however invested in assets which therefore helps one save on transaction and lower its cost. Investors get the savings as lower costs of investing in Mutual Funds.

Mutual Fund is a strong financial tool which has helped in increasing the growth of Indian economy. Mutual Fund have provided financial stability to the Indian economy. The Indian capital market has been increasing significantly during last few years. With the Industrial revolution and reforms of financial sector, the economy has been opened up and many developments have been taking place in the Indian money market and capital market. In order to help the small investors, mutual fund industry has come to occupy an important place in the Indian market.

Although there are many benefits of investing in mutual funds in India, but we must remember that every good thing comes with some flaws. The market condition is very dynamic. Not anyone can invest in mutual funds. One needs to have a proper knowledge to do that.  However, one thing which is certain is that there’s no harm in it. India still has many steps to climb.