Why Should You Invest In Mutual Funds And What Are The Advantages Of Mutual Funds?

There are many advantages to investing in mutual funds, including versatility and diversification of investments, liquidity of the funds, and professional management and the economies-of-scale accruing from it.

When considering the different avenues of investment, a natural question arises: How is it better than the others? The question especially arises when the investment option is not one of the traditional 'trinity' – land, gold, and fixed deposits. So in this article, let us talk about mutual fund investments. What is so great about it?

Versatility

Putting your money in most forms of investment is usually a lump-sum transaction. When buying a piece of land, for example, you need to save up enough for at least the down-payment. There is no such pressure to do lump-sum investments with mutual funds. It does not matter how frequently or how much you want to invest. There is usually an option that is available to you. The sheer versatility – in terms of risk and in terms of the amount of money you want to invest – is a major advantage of mutual funds.

Diversification

You have options not just in terms of how much you want to invest but also what you want to invest in. Let us say that you are watching a particular industry and realise that the industry is going to grow tremendously Will you have the resources at your disposal to invest in all the companies? Most likely, Not! That?s where mutual funds come in. You can invest just Rs. 1000, if you want, in a particular company or an industry through mutual funds. Spreading your money across the board  reduces the risk of losses and maximises your profit potential.

Liquidity

Mutual funds are as liquid an option as you can get. Some people operate under the misconception that money invested in a fund has to stay in for a predetermined period of time and that there would be no option to withdraw the sum. This is simply a myth! All that you have to do is decide to redeem a particular investment and the money from the redemption would be credited to your bank account the very next day! If you have a share or a piece of land, clearly this is not going to be possible for how can you sell if there is no ready buyer?

Professional Management

Lack of knowledge is not a deterrent to investing in mutual funds. This might even pose a hurdle for other methods of investment. For example, if you wanted to invest in a property and if you want someone who has knowledge of the real estate practices to have a look over the property and evaluate the quality of the construction, that might not be feasible for everyone. Where will you find the expert, if you have no such contacts? On the other hand, mutual funds are professionally managed. Every fund has a manager and a team of industry experts keeping an eye on your investments. You do not need to make sure your money earns more money for you – you have a ready team of experts at hand to do that very task!

Economies-of-scale

An extension of all of the above advantages is the advantage of economies-of-scale. Because the fund is professionally managed, it is not just one individual trying to invest in a wide variety of companies. Therefore, the pooled money reduces the per head costs of investment and makes scaling up very easy to accomplish.

Ease of Investment

Investing in mutual funds is so easy that you will barely break a sweat! You do not need to go in person anywhere, nor do you need to apply to any organisations for permission to trade. Take our own website. If you are registered with Wealth Central, you will be given a login ID and password and all transactions are paperless. All you need to do is provide proof of ID initially and our representatives will take care of everything! What?s more, you can track your investments, you will be sent reports on the performance of the funds and you can give instructions on how you want your investments to be handled. And if you want to withdraw money from a fund for a particular need, you can choose the redemption option yourself. It is as simple as that!