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If you are reading this, you have most likely heard the tag line “Mutual funds – Sahi Hai”. In this blog we discuss mutual funds sahi kyu hai (why are mutual funds the right option) and the key reasons for their popularity as an investment option.
Let’s start by understanding the basics.
What are mutual funds?
A simple way of defining mutual funds is that money from many investors is collected by a company and invested in securities like stocks, bonds, and other assets. Investors collectively share the gains or losses on the investments in proportion to their contribution to the mutual fund. So it is like having a basket of funds where you buy one share of this basket. Mutual funds have higher returns potential than traditional investment options like bank deposits.
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There are different kinds of mutual funds that are unique for achieving a person’s financial goals. The process of choosing the right mutual fund can be an overwhelming experience. Financial advisors can guide people in making mutual fund investments. Systematic Investment Plans (SIP) are a periodic method of investing in mutual funds. It allows investors to put in a specific amount at fixed intervals. There is a classification of mutual fund schemes based on asset class, investment objectives, and structure.
4 key reasons why mutual funds are popular
There are many reasons for choosing mutual funds as a part of a healthy investment portfolio. Here we are highlighting the 4 top reasons for the popularity of mutual funds.
Diversification
Never put all your eggs in one basket.
This is a well-known saying that is apt for an investment portfolio. Mutual funds give the advantage of built-in diversification. Your money is spread across a variety of investments which reduces the dependence on a single company, sector or market. This, in turn, decreases the risk for investment, especially when compared to stocks. A wider range of finds to choose from also means that you have more options to meet your various financial goals.
Professional management
Managing a mutual fund portfolio can be an overwhelming task for an individual investor without deep knowledge of the investment option. This is why mutual funds are managed by professionals who have the right expertise to invest, buy and sell in the mutual fund market. Amowa Financial Planners provide dependable portfolio management services for mutual funds and make your investments fruitful and hassle-free.
Disciplined Investing
Mutual funds encourage wealth creation through systematic investment. SIPs or Systematic investment plans are a great way to cultivate financial discipline to meet financial goals. After opting for a mutual fund plan, the investor needs to set aside the decided amount for the mutual fund instalment. This helps in long term wealth creation and higher returns as a result of dedicated investment.
Flexibility
It is extremely easy to buy and sell mutual funds, if there is a need of urgent access to your money. Mutual funds also allow you to increase or decrease your SIP as per your current financial situation. This makes them an investor friendly investment option that can be utilized as per your specific goals and needs.
Conclusion
Mutual funds are an attractive opportunity for wealth creation. They offer numerous benefits and are a must have in any investment portfolio. It is necessary that mutual funds be managed professionally by experienced financial planners. Experts ensure that your mutual fund investment is diversified in the right way and provides the maximum returns as per your investment objectives.
Amowa Financial Planners are help you minimize your risk and maximize benefits with your mutual fund investments.