Benefits of Mutual Fund Investment

If you wish to know what are the benefits of mutual funds and how they can help you create long-term wealth, this article can help you. We detail the benefits of mutual fund investment and give you solid reasons why you should start an SIP (Systematic Investment Plan) so you can meet your financial goals and prepare for the future.

Liquidity

It is very easy to purchase and exit mutual funds unless you have invested in a closed-ended scheme. If you need urgent cash, you can sell your fund units at any time. However, some plans impose a pre-exit penalty or exit load, so be aware of the terms and conditions. Also, keep in mind that mutual fund transactions occur only once per day after the scheme releases the day’s NAV. 

Safety

One of the main benefits of investing inmutual funds is safety as they are as secure as bank products. Mutual funds are strictly governed by regulatory bodies like AMFI and SEBI, and you can easily learn about the credentials of a scheme from them. Plus, they provide a grievance redress system to help resolve investor concerns promptly and satisfactorily. 

Save Tax 

You can save tax under section 80C by investing up to Rs. 1.5 lakh a year in an ELSS (Equity Linked Savings Scheme). This scheme has consistently provided higher returns compared to other tax-saving plans like FD. Thus, tax-efficiency through ELSS investment is one of the key benefits of mutual funds. 

One-time or Systematic Investment 

If you have extra money at hand you can opt for a lump sum one-time investment. Salary earners who have to contend with monthly expenses can opt for a SIP on a quarterly or monthly basis and invest steadily in a good scheme. SIP installments can be as low as Rs. 500 per month, so you can start with a small amount initially and then enhance it as you grow in confidence and your earnings increase over time. 

Diversification

If you are averse to the market risks of equity-based schemes, you can opt for a diversified plan that includes money market instruments, debt funds, etc. This helps you to avoid putting all your eggs in one basket and also avail the guaranteed returns from fixed income instruments. In this way, you can minimize your risk and the possibility of loss. 

Conclusion

Other benefits of mutual fund investment include expert management, reduced expenses for bulk transactions, fast and painless investment process, automated payments, and creation of long-term wealth. So do your homework and select a suitable mutual fund scheme to invest in based on your appetite for risk and the returns you wish to avail.