One of the most misunderstood financial products is mutual funds. However, the reality is that it is one of the best investment vehicles for long-term wealth creation. By investing in them, you get to enjoy a host of different advantages ranging from convenience to liquidity. If you’re someone who is wondering what mutual funds benefits are, then this article is for you.
Irrespective of the type of mutual funds you invest in, there’s a certain set of benefits that you get to enjoy. Here’s a brief overview of some of the most important advantages.
Now, since a mutual fund pools funds from multiple investors and invests them in different stocks and securities, you benefit from diversification. In addition, by spreading the investment risk across multiple securities, mutual funds effectively reduce the chances of you losing a significant part of your investment due to headwinds.
Another huge benefit that you get to enjoy by investing in mutual funds is the fact that they’re very liquid. Buying and selling units of a mutual fund is very easy, with some funds even offering instant redemption facilities, where the funds are transferred to your bank account on the same day of redemption.
There are multiple different kinds of mutual funds available in India. One of them, in particular, known as the Equity Linked Savings Scheme (ELSS), offers tax benefits to the tune of Rs. 1.5 lakhs in a financial year in the form of deductions from your total taxable amount, allowing you to save a considerable amount of tax.
In the case of mutual funds that invest in the equity market, you get the chance to generate returns that are much higher than what many traditional investment options are capable of offering. Moreover, in addition to capital appreciation, you may also be eligible to receive dividends on your investments, accelerating the return generation potential even further.
With mutual fund investments, you get the freedom to customize them as you wish. For instance, you can choose to make a lump sum investment or start a Systematic Investment Plan (SIP). In the case of a SIP, you again get to determine the amount of investment, the tenure, and the frequency of investment.
All mutual fund houses and mutual fund investments are heavily regulated by the Securities and Exchange Board of India (SEBI). And according to the various mandates and regulations issued by the watchdog, there’s complete transparency concerning the investments made by fund houses.
With this, you must now be aware of what the benefits of mutual funds are. Now, before you proceed to invest in one, it is essential to ensure that you have an active Demat account in your name. If you don’t, you can simply open a Demat account for free by visiting Motilal Oswal. With the Demat account opened, you can invest not only in mutual funds but also in upcoming IPOs too.