Investing your hard-earned money to earn returns has become a trend lately. As people are getting aware of the benefits that investment offers, they are investing more. However, in a country like India, where investment options are in abundance, it becomes challenging for investors to choose the right option. From fixed deposits to stocks, gold to bonds, there is a vast range of options available in the market.
Now the question arises-where should you invest?
You, as an investor, need to consider several things like the investment tenure, your risk appetite, and your goals that you want to achieve. It is also advisable to take an investment counselor’s advice for a better understanding of the investing world.
Which investment options provide minimal risk and maximum return? One of the possible answers is a mutual fund. You might have heard people saying, “Mutual Funds Sahihai.”Let’s see how:
It Diversifies Your Portfolio
Mutual funds invest mainly in debts and equities. Some funds are pure debt, whereas some are just equities; others are hybrid or balanced.
They provide you a diverse portfolio as they spread out your money over different types of assets. Your money is invested in a strategic way to provide secure market-linked returns.
For instance, if you want to invest Rs. 500/- directly in equities, you would probably get only a share or two. Whereas, if you invest through a mutual fund, you will get a basket of several stocks for the same amount.
This way, if some financial assets in your portfolio don’t perform, the others will compensate.
You Can Invest Small Amount
You can begin investing with as little as Rs. 500 per month. One of the main advantages that mutual funds offer is that you don’t have to wait to accumulate enough cash to make investments. Since you can optimally use cash available to you and earn maximum returns, this is one reason why investing through mutual funds sahihai.
It Reduces Your Tax Liability
With mutual funds, you will not only earn market-linked returns but also save income tax. Take the case of ELSS funds. Investing in these funds can reduce your taxable income by Rs 1,50,000/-under Section 80C of the Income Tax Act – 1961.
It Offers High Liquidity
Most of the mutual funds are open-ended.If you invest in them, you have the advantage of buying and selling your units at any time. The total redeemable or buyable value of your fund depends on its net asset value (NAV) for that day.
Closed-ended mutual funds are also liquid, though they have a fixed duration. For instance, ELSS has a lock-in period of 3 years. However, once these funds are listed on a stock exchange, they are freely sold and bought. So, whether you purchase closed-ended or open-ended funds, they are always high on liquidity.
SIP Assures Higher Returns Over Long Term
For first time investors, systematic investment plans (SIP) are the best.If you are investing in equity or equity-oriented funds. SIP allows you to spread your investments over time, and you can invest at different market levels. It also helps you earn higher returns over the long-term.
You can invest in debt funds and start a systematic transfer plan (STP)if you have a significant amount to invest.
Investing your hard-earned money in mutual funds can help you earn high returns. However, it is advisable to take the advice of an investment counselor if you know less about the right way to invest in these funds. Some reputable financial advisors, such as FinEdgecan help you in making the right mutual fund investment decisions.