As we discussed earlier, Mutual Funds investments can be very good for you if you are looking for a steady growth in your savings without subjecting them to a big risk. With direct stock trading, there is always a risk if you don’t have enough knowledge and let’s be honest it requires a very good and detailed knowledge to gain anything through the stock trading.
But with Mutual Funds there are some key benefits that make it a very reliable way to invest for a large diversity of Indian Individuals.
Benefits of investing in Mutual Funds in India
The most important benefit of investing in a Mutual Fund is that the investor can redeem the units at any point in time. Unlike Fixed Deposits, Mutual Funds have flexible withdrawal but factors like the pre-exit penalty and exit load should be taken into consideration.
The value of an investment may not rise or fall in tandem. When the value of one investment is on the rise the value of another may be in decline. As a result, the portfolio’s overall performance has a lesser chance of being volatile.
Managed by Experts
A new investor may not have much knowledge or information on how and where to invest. The experts manage and operate mutual funds. The experts pool in money from investors and allocates this money in different securities thereby helping the investors incur a profit.
Flexibility to invest in Smaller Amounts
If You draw a monthly salary then you can go for a Systematic Investment Plan (SIP). Through SIP a fixed amount is invested either monthly or quarterly as per your budget and convenience.
Schemes for Every Financial Goals
The best part of the Mutual Fund is the minimum amount of investment can be Rs. 500. And the maximum can go up to whatever an investor wishes to invest.
The only point one should consider before investing in the Mutual Funds is their income, expenses, risk-taking ability, and investment goals. Therefore, every individual from all walks of life is free to invest in a Mutual Fund irrespective of their income.
In a Mutual Fund, funds are collected from many investors, and then the same is used to purchase securities. These funds are however invested in assets which therefore helps one save on transaction and other costs as compared to a single transaction. The savings are passed on to the investors as lower costs of investing in Mutual Funds.
Safety and Transparency
With the introduction of SEBI guidelines, all products of a Mutual Fund have been labeled. This means that all Mutual Fund schemes will have a color-coding. This helps an investor to ascertain the risk level of his investment, thus making the entire process of investment transparent and safe.
Lower Tax on the Gains
With Equity linked saving scheme you can save tax up to Rs. 1.5 Lakh a year under section 80C of Income Tax (IT) Act. All other types of Mutual Funds are taxable depending on the type of fund and tenure.
Before making an investment one should keep in mind the various advantages Mutual Fund provides. Thorough knowledge of the benefits of Mutual Funds would lead to better gains in the future.
Best Tax Saving Option
Mutual Funds provide the best tax saving options. ELSS Mutual Funds have a tax exemption of Rs. 1.5 lakh a year under section 80C of the Income Tax Act. You can use Scripbox’s income tax calculator to ensure tax plan requirement
Lowest Lock-in Period
Tax Saving Mutual Funds have the lowest lock-in periods of only 3 years. This is lower as compared to a maximum of 5 years for other tax saving options like FD, ULIPs, and PPF.
On top of that one has the option to stay invested even after the completion of the lock-in period.