Generating savings or plans to invest has different benefits. An individual can make short- and long-term investment plans. Because of the risk management, there are various investors you would like to invest in mutual funds. However, before investing in mutual funds, every investor must know the advantages and disadvantages of mutual funds. In this blog, one will get complete information about the advantages and disadvantages of mutual funds.
A mutual fund contains money pooled from various investors. A dedicated and professional fund manager invests the pooled money in different investment securities in each type of mutual fund scheme. Investing securities can be silver, gold, stocks, bonds, treasury bills and commercial papers.
Investing in mutual funds is based on different classified securities. Hybrid funds, equity, and debt are the most prominent of all the types of securities. Equity funds invest their money in stocks or shares, and debt funds invest in fixed-income securities. However, in the case of hybrid funds, cash is invested in different proportions in both stocks and fixed-income securities.
However, choosing from these types depends on the investor's choice and objective.
Below is the complete list of the advantages of mutual funds. Learn about the benefits of mutual funds in this article and then decide to invest in mutual funds at your comfort. Perhaps, after reading this article, if you are confused or have some questions you have to ask, you can visit the share market classes in Indore, and under the guidance of experts, you can solve your every query.
In India, the fund house hires asset managers or fund managers who help manage mutual funds. These managers perform sound research and find the right stocks in which an individual can generate profit by investing his money.
In mutual funds, money is invested in multiple sectors of shares or stocks. By diversification, the loss in one asset class can be minimized by the profit earned in another.
The most overlooked advantage of mutual fund investing is liquidity. Buying and selling mutual funds can quickly be done during market hours, which is why they are considered highly liquid. Funds like ELSS are not highly liquid, as there is a need to invest in a specific lock-in period.
An individual can invest a minimal amount in mutual funds. The fund manager's fee in India ranges from 1% to 2.5%. The low cost of investment allows one to make higher returns if one stays for the long term. Returns growth is based on the amount grown over a given time frame.
Individuals can benefit from tax savings if they invest in mutual funds via the equity market. Up to Rs 1.80 lakh, the investment made in ELSS is free from tax as per the government's section 80C
Individuals can start investing in mutual funds with a minimum amount of Rs 500. Hence, one can opt for an SIP or a lump sum method of investing in mutual funds as per their convenience and comfort.
Investing in mutual funds comes with high transparency. All companies need to work under the guidance of SEBI by following its rules and regulations. Hence, they make every disclosure.
Below is the complete list of the disadvantages of mutual funds. Be aware of these disadvantages; avoiding them can increase the chances of loss.
In the above section, we mentioned cost as an advantage and disadvantage. In India, some mutual funds are associated with higher prices. Sometimes, you have to pay extra charges as a penalty if they exit from mutual funds before the predetermined time. Perhaps before the given or predetermined time, money withdrawal is not possible.
Through diversification, you can prevent the chances of loss, but on the other hand, it can also be a disadvantage as it prevents the possibility of earning profits. Various sectors can generate huge profits; not investing in them can be a significant loss.
A lock-in period is The worst disadvantage of mutual fund investing. Before the expiration of a predetermined time, it becomes difficult to withdraw your invested amount. Hence, converting your money into liquidity during an emergency becomes quite challenging.
The returns on mutual funds have fluctuated based on market conditions. Hence, returns are not fixed when investing in mutual funds. However, investors must know the risks before investing in mutual funds.
Perhaps it doesn't seem very easy to choose the right investment type, or if after selecting the investment, it's challenging to find where to start, then join the Stock Market Course in Indore at NIWS and learn how to invest in the right investment type. At NIWS, the experts will guide you and teach you how to make the right decisions on your investment path, which makes the track hurdle-free.
Start with a demonstration class.