Mutual funds are a convenient and safe way to invest your money, without having any prior
experience or knowledge of the market. Mutual funds are schemes, all registered under
Securities and Exchange Board of India (SEBI), that are managed by an asset management
company, and one who wants to invest, can buy mutual fund units or shares. They are
valued at their net asset value (NAV) that keeps fluctuating over time, which is ideal for small
investors. It is a type of investment where small investors can come together and pool
money into one professionally managed scheme without any hassle.
Here are some reasons why investing in mutual funds is a smart idea:
Easy: The thing that makes mutual funds so convenient is that you need no
experience or theoretical understanding of the financial market or how it works.
Beginners or small investors can easily invest their money in mutual funds because it
is so simple to understand as compared to other investment options.
Diversified: Mutual funds allow room to make diversified investments and in turn
helps lowering the risk of loss. For a starter, investing in a variety of securities means
that a slump in any one of them will not be adverse. The market risk of the mutual
funds gets diluted due to diversification and one can enjoy risk-free investment.
Low Cost: As compared to single equities, mutual funds are low on the accumulative
costs. Brokerage, managing a portfolio, and transaction costs usually drive the cost
of individual securities up and it is a smart option to invest in mutual funds if one
wants to avoid that.
Management: Mutual funds are professionally managed by experts and professionals
of the financial market. A small investor or beginner can save a lot of time and energy
into maintaining a portfolio and let the experienced and skilled experts take care of
Liquid Asset: One of mutual funds’ biggest advantages is liquidity, which means that
the asset can be converted into cash conveniently. One can choose to not tie up their
investment for long periods of time and can be liquified without any exit load.
Safe: Being under the purview of SEBI, mutual funds remain quite transparent as
compared to other types of investment. NAV is updated everyday and value of stocks
and the past performance of the fund is known to the investor.
Investing in funds depends on one’s requirements and on the risk the investor is willing to
take, but mutual funds are versatile enough to be a smart and logical option for both small
investors and large investment funds.