Mutual fund investments have gained enormous popularity in recent times. A mutual fund is essentially an investment scheme that pools money from several investors and invests it in securities such as stocks, bonds, or gold. You can invest in mutual funds in a disciplined manner with the help of Systematic Investment Plans (SIPs).You can keep your SIP as low as Rs. 500, and this makes mutual funds an ideal investment vehicle even for small investors.
Investing in mutual funds can inculcate a healthy habit of regular investing. This can help you become financially disciplined. Some of the other benefits of investing in mutual funds for small investors are mentioned below:
1. Goal based investing
You can meet your financial goals by investing small amounts regularly. The mutual fund returns can help you build a large corpus that can be utilized for various purposes such as buying a property, managing your kid’s higher education, etc. The SIP investment, hence, can prove to be extremely helpful over a long period of time.
2. Liquidity
Mutual funds are considered to be liquid investments. Therefore, you can redeem your unit holdings at any point. However, factors such exit load and tax implications should be taken into consideration before opting for mutual fund withdrawal.
3. Portfolio diversification
Portfolio diversification helps in minimizing market risk significantly. As mutual funds consist of many securities, investor’s interests are safeguarded even if there is a fall in other securities purchased by the fund. For instance, in equity mutual funds if some stocks underperform, the outperforming ones can make up for the losses.
4. Expert management
As a beginner, you may find it difficult to understand how and where to invest in mutual funds. A professional fund manager can help you make the right decision by analysing the market thoroughly.
5. Transparency
You can easily invest in mutual funds if you have a savings bank account. Moreover, you can easily review your investment portfolio as well as manage and redeem your mutual funds online in a hassle-free way.
6. Well regulated
The Securities and Exchange Board of India (SEBI) regulates and monitors mutual funds. This safeguards the interests of investors, making mutual funds a safe investment vehicle. The investors are provided all the standard information about their investments, along with other disclosures like specific investments made by the scheme and the investment quantity in each security.
Irrespective of how small or large the investment is,a mutual fund offers the same investment performanceto both small and big investors. Therefore, it’s time you analyse your risk-appetite, set your financial goals, and start investing in mutual funds at the earliest.
To obtain maximum returns, it is advisable to stay invested in mutual funds for a longer duration. You can even utilize the corpus obtained to plan your retirement and be financially independent at later stages of your life. In case of any query while investing in mutual funds, make sure to seek the help of a financial advisor for making a well-informed decision.