6 Benefits of Investing in Top Mutual Funds In India

As a financial instrument, mutual funds pool money from different investors to invest in stocks, bonds, and other securities to generate profits as per the NAV(National Asset Value) rates. As the NAV increases or decreases, so is the worth of your investment. The NAV depends on factors such as the market condition and performance of the securities in which the mutual fund has invested.Some people may prefer to invest in stocks directly rather than going for mutual funds due to expense ratio and little control over investment. But looking at the benefits that mutual funds offer , it emerges as a better investment avenue, especially for retail investors. Let’s look at the advantages of mutual funds over other options:

1. Diversified Portfolio Since the money is invested in a wide variety of stocks and securities, the overall performance of the portfolio is guided by their combined performance. Generally, if one investment in underperforming, there may be other investments in the portfolio that are doing well. Hence, there are greater chances of the losses getting balanced out, thereby improving the overall performance of the fund.
2. Flexible Investment Amount One of the major benefits offered by a mutual fund is its flexibility in the investment amount. You need not invest a huge amount at one go and can invest in small denominations as per your convenience. If you are working on a monthly salary, you may start a SIP with as little as Rs 500 a month. You can invest monthly or quarterly in SIP schemes, as per your convenience.
3. Expert Fund Managers If you are investing in mutual funds for the first time or have little or no knowledge about the market and various securities, mutual funds are just suitable for you. Since these funds are managed by skilled and experienced fund managers, they can watch the performance of securities closely and take better decisions about the movement of funds from one stock to another. Hence, your money stays in safe hands.
4. Ease of Investment You can invest in mutual funds very easily through online as well as offline modes. You can buy a mutual fund through an Asset Management Company(AMC) or its distribution channels such as brokerage companies, banks, online platforms, etc. Hence, mutual funds are easily available for everyone to invest through various channels and can be tracked and managed with few clicks. Also, you need not have a Demat account for investing in mutual funds.
5. Suitable for Long-Term Financial Goals Mutual funds are suitable for realising long-term financial goals such as education, marriage, pension corpus, etc., especially if you stay invested in a disciplined manner, for the entire duration of the fund. The market can be unstable in a shorter duration, but it is expected to perform profitably in the long run. Hence, it can facilitate wealth creation for your long-term goals.
6. Tax-Saver Funds Available The taxation on mutual funds depends on the investment type and duration of investment but the dividends received are tax-free. Also, there are schemes such as the ELSS(Equity linked saving scheme) that allows you to have a tax exemption of up to 1.5 lakhs under section 80C of the Income Tax Act. Also, ELSS can potentially generate higher returns than other tax saver investment options such as PPF or 5-year FDs.

Picking the top mutual fund can be tricky but not difficult. All you need to do is follow the basics, and you should be able to find the investment of your choice. To find the best mutual fund, there are a few things you should check

1. It’s risk category.
2. Fund’s asset allocation.
3. It’s past 5-years performance.
4. Fund manager’s track record.
5. Expense Ratio of the fund.
6. Asset Management Company’s (AMC’s) Credibility.
7. Fund’s Asset Under Management (AUM).

Flexible Schemes for Every Investor

Mutual Funds allow you to invest easily, in a disciplined and regular manner even with smaller amounts. Though there are associated risks with top mutual funds, it has the potential to generate higher returns than conventional investment options such as FDs and recurring deposits. You just need to pick the right fund with great past performance and reputation in the market.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.