The assets under management (AUM) of the Indian mutual fund industry have witnessed a seven-fold increase in a span of 10 years, rising from ₹9.59 trillion in September 2014 to ₹₹67.09 trillion in September 2024. Mutual fund investments bring several benefits to the table, contributing to their rising popularity. There are multiple reasons why they might perfectly fit into your scheme of things.
Benefits of Investing in Mutual Funds
Allows You to Start Small
If you are starting your career like Anushka and don’t have a large investible surplus, you can still invest in mutual funds. Several funds allow investments from as little as ₹500 or ₹1000 per month through SIPs. The convenience of starting small ensures mutual funds are within the reach of a large section of investors.
Capital market regulator Sebi is contemplating micro SIPs through which you can invest as little as ₹250 per month to promote financial inclusion and draw investors with limited financial resources. To put it otherwise, with mutual funds, you may not be required to avail margin trading facility from your broker to invest.
Offers Ample Choice
Remember how you look for options while buying any product, offline or online. The goal is zero in on a product, ticking all the right boxes. Mutual funds do the same. The mutual fund universe is vast, and you are likely to find a fund that caters to all your goals, whether short-term, medium-term, or long-term, and aligns with your risk appetite. The broad category of mutual funds includes:
Equity
Debt
Hybrid
Solution-oriented
Others, such as ETFs, Index Funds, and Fund of Funds
You can go for equity funds if you have a high-risk tolerance and want to build a corpus for long-term goals like retirement. Conversely, if you have a low-risk appetite and want to play safe, you can invest in debt funds.
Similarly, you can opt for hybrid funds if you wish to have the best of both worlds, i.e., equity and debt. Even within the broad schemes, you will find sub-categories that enhance your choice by several notches. The sheer options available with mutual funds make them one of the go-to financial instruments for a large section of investors.
Helps You Diversify Your Investments
Do you recall one essential piece of advice parents gave while visiting your relative’s home for any occasion? It was not to keep all the money in one place but to distribute it. The idea was to safeguard against complete loss in case of any untoward incident. Diversification is a core investing principle that hedges against volatility and helps stabilise your portfolio.
Mutual funds can aid you diversify your investments across companies in different industry verticals. This is because they invest in a basket of securities and not in a single stock. When you invest in a mutual fund through a demat app or otherwise, your money gets invested in different stocks across firms in a certain percentage.
This ensures the performance of the fund is not dependent on one company or sector. If one firm or sector fails to do well, others can make up for it. The information on the companies and sectors which form a fund’s underlying portfolio is available in the fund’s factsheet.
Professional Management
Expertise and experience play a vital role in several spheres of life, and it can make a world of difference when it comes to investments. With proper guidance, you can navigate choppy waters with ease. Mutual funds give you the benefit of professional management as an experienced fund manager helms every fund.
Fund managers are experienced and qualified professionals who are well-versed with market nuances. A fund manager along with his team keeps a close eye on market developments and takes calls accordingly to augment the fund’s performance to benefit investors. You don’t need to monitor markets, as the fund manager does that on your behalf.
High Liquidity
Imagine a situation when you need access to money on short notice. Mutual funds can come to your aid in such times. They are pretty liquid, and you can easily convert them into cash. Once you put forward a redemption request, the money gets credited into your account within one or two business days. That’s not all. Unlike traditional instruments like fixed deposits, where you need to break the entire deposit, even if the whole amount is not wanted, mutual funds allow you to redeem partial units.
For example, if you have 100 units of a fund, you can redeem only 50 units, allowing the remaining 50 units to stay invested and earn returns. Money, equivalent to the number of units redeemed, will be credited to your account.
Conclusion
Thanks to its investment flexibility, options, diversification and professional benefits, mutual funds have made deep inroads into investors’ portfolios. With HDFC SKY, you can quickly open Demat account and invest in your chosen fund on the go. That’s not all.
This Demat account app also allows you to invest in stocks seamlessly at a competitive price. Download now to begin your investment journey.
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