A beginner comes to the market and dreams to be a millionaire overnight. That’s not true and not even possible. Some investors start their investment journey by investing in equity. I’m not saying that it is not good. It is a stupidity to invest in direct equity without doing any market research and market analysis. Sometimes stocks that you have purchased can grow, but it can’t be always. We also have that time to do research while investing. Then you must have a question in your head, that should we invest in stocks or not???
Here comes a better option for that, which is called mutual fund.
What is mutual fund?
Mutual fund is a type of fund, where highly qualified fund managers allocate money from various retail investors like me and you. Then he does his research and tracks various stocks and makes a portfolio of various stocks from the various industries or various sectors.
Benefits of investing in mutual fund:-
1) Benefits of diversification:-
There are some benefits that say why we should invest in mutual fund. The first one is there are nearly thousand companies present in stock market and you can’t track all companies at your own. To gain maximum amount of returns you have to diversify your investment. Mutual fund allows you to invest in various investments like equity, debt, government securities etc. By mutual funds, we can invest in various industries. Because sometimes a specific industry can go in bear run. At that time our portfolio diversification can generate you profit. By investing in various companies your returns can be good as compare to the individual one.
2) Various types of mutual fund
There are many types of mutual funds like equity fund, debt fund, hybrid fund and gilt fund etc… equity fund means your money would be invested in various equity which lead to growth. In debt fund your money would be invested in various debt instruments like bonds, debentures, government securities. Hybrid fund is actually a mixture of both equity and debt. So you can get growth and safety at a same time.
3) Small investments:-
Mutual fund allows you to start your investment journey with minimum Rs.1000/-. As an individual investor you have to pay full amount of the stock to buy it. We can’t buy a fraction of it. By investing in mutual fund investors like you and me give our small amount of money to fund managers and they invest in various stocks. So you can get a small portion of that stock.
Many investors think that mutual funds are not safe. But the mutual funds are regulated and handles by SEBI (securities and exchange board of India). SEBI has made various rules and regulations to protect money of investors. So it is safe to invest in mutual funds.
Mutual Funds are obligated by SEBI to present all scheme related data to the investors. All funds show their NAV (net asset value) every day. The mutual funds release all data related to investment portfolio every month. Thus every investor can see the data of the mutual funds with such an ease. This is such a transparent process.
6) Tax deductions:-
Another point related to why we should invest in mutual fund is tax deductions. First of all if you sell any investment, you have to pay tax on it. However it doesn’t happen when that buying and selling is being done on your behalf by a mutual fund. To gain the maximum amount of profit, fund manager keeps buying and selling as needed. According to law you have to pay tax when you redeem your money from the fund. The other thing is you can deduct your income tax up to 1.5 Lacs. according to 80C.
There are so many benefits of mutual funds. But here we have just shown few of them.