Best Investment Tool - Mutual funds
Every one of us have set financial goals for various events or occasions like marriage and education of children along with keeping some monetary reserve for oneself after retirement when stepping out to earn is not possible. Also keeping money is not wise as the purchasing power of money decreases with the time as inflation is bound to slope higher in graph. So investment is must to be able to have adequate amount of fund for the anticipated events and also for unanticipated hardships that may knock your door anytime. So question arises which investment pool is best and can render you maximum return on the right time as various kinds of investment tool are available in market.
Various investment vehicles prevailing in the market
- Bank deposit
- Public provident fund
- Corporate bonds
- Financial institution bonds
- Equity linked saving scheme (ELSS)
- Mutual funds
These days mutual fund investment is most popular investment tool. Investment in mutual fund is an increasing trend subsisting these days among folks of almost all classes and almost every intelligent investor is making this smart move of investing in it. It enjoys benefits like diversification, financial advisor’s management and of course lucrative returns, which generally a common man comprehends well and thereby makes investments in it.
This article is to guide you the advantages that MFs renders over other investment pools though return is offered by all.
What is a mutual fund?
Mutual fund is an investment scheme managed by professionals involving investment in stocks, bonds and securities on behalf of investors by money manager. A small amount is charged by them for investing the money into productive schemes. Every investor owns share of mutual fund representing proportion of holding in mutual fund.
Advantages of mutual fund
- There are various investment choices but quantum of risk and return should be evaluated before opting for investment. Equity linked saving schemes involves highest risk and return where as investment in postal schemes caters reasonable or low returns with low risk. Mutual funds on the other side, involves low risk and high returns.
- Dividend received on Mutual funds enjoys tax evasion and high rate of liquidity.
- Diversification is the biggest characteristic of Mutual fund investment and thereby it constitutes low risk rate due to investment in diverse stock and industries.
- Mutual investment proffers remarkable flexibility on comparing to other sorts of investments. Systematic investment plans, systematic withdrawal plan, reinvestment of dividend along with minimum investment amount of Rs 100 makes it more flexible as one may liquidate the mutual fund holding easily in comparison to other investment avenue.
- Mutual fund provides Wide Avenue of investment like arbitrage fund, Funds of funds, ETF, Balances, equity and debt.
- Most importantly its purchase and sale is managed by expert having experience and comprehensive knowledge of the market and schemes. They know and foresee the condition of market and thereby are capable of taking best decision in the favour of investors.
Conclusion
Mutual fund investment is risk free investment proffering diversification, high liquidity, low risk, high returns and numerous other benefits. It facilitates investments opportunities to average investors with fewer funds along with investors having fund in abundance. It is in the interest of every individual likely to invest in risk free avenues.