Mutual fund investments have become one of the most popular investment vehicles in the last few decades among retail investors. Investing in mutual funds is a hassle-free process and you can compare mutual funds to understand the right type of mutual funds for your investment portfolio. If you are still not convinced to invest in mutual funds, let’s look at some of the benefits of investing in mutual funds in India:
Benefits and advantages of investing in mutual funds in India
Here are few benefits of allotting your assets in mutual fund investments:
- Diversification
One of the key benefits of mutual fund investments is the diversifying of investment portfolio. Diversification is the spreading of assets across multiple asset classes and sectors and categories to diminish the exposure of risk arising from any one type of investment. Diversifying also helps to offset the losses arising from any particular asset class or investment by another asset class or investment. - Professional management
Several investors do not have the time, resources, and expertise to buy individual stocks and invest in the markets on their own. Mutual fund investments are ideal for such investors due to the professional management it offers to investors. Mutual fund investments are managed by a mutual fund expert known as fund manager who has the skills and knowledge to choose the best types of investments for an investor’s portfolio and make investment decision on behalf of investors. - Tax benefits
The government provides numerous tax benefits to investors to invest in mutual funds. This is done so as to encourage investments in mutual funds. One of the most prevailed mutual fund tax benefits is the mutual fund tax saver schemes or ELSS (equity-linked savings scheme) investments. ELSS funds offer a tax deduction under Section 80C of the Income Tax Act, 1961 for a maximum investment amount of up to Rs 1,50,000 every year. Note that, investors belonging to the highest tax slabs can enjoy tax deduction as high as up to Rs 46,800 per annum.
Liquidity
Since the money is spread across various stocks, one can easily sell mutual funds to meet financial demands. The money hits your bank no more than 2 working days. Additionally, there are mutual funds that provide faster disbursal in your account. These mutual funds are called Instant redemption funds, wherein the money is transferred in your bank within 60 seconds.
- Higher Return on Investment (ROI)
Another benefit of mutual fund investments is the higher potential of earning significant returns on the investments. If history is proof, then mutual fund investments have the potential to generate double digit returns when invested for a prolonged duration. - Well-regulated
All mutual fund schemes are highly regulated by the Indian mutual funds’ regulator – SEBI (Securities and Exchange Board of India). What this means is that all mutual fund schemes are mandated to follow certain mandates laid down by the SEBI. This works in the favor of investors as their interests are well protected and regulated.