ADVANTAGES
Mutual funds are advantageous to individual investors in relation to their direct involvement in investment portfolio activity covering the following aspects:-
1. Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
2. Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.
3. Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. It would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.
4. Variety
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity
5. Tax Benefits
Income tax exemption and been ensured for Mutual Funds. Investors are eligible for deduction under section 80L of the Income Tax Act in respect of the dividends from units of shares of Mutual fund and under Section88 in respect of contributions made by investors to unit linked insurance plan of UTI and LIC Mutual fund .
6. Regulations
Securities Exchange Board of India (“SEBI”), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Thus this type of regulation seeks to protect the interest of investors.
7. Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
8. Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
9. Low Costs
Investing in the capital markets because the benefits of scale in brokerage, Mutual Funds are a relatively less expensive way to invest compared to directly custodial and other fees translate into" lower costs for investors.
10. Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-ends schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.
11. Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
12. Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.
Mutual funds are advantageous to individual investors in relation to their direct involvement in investment portfolio activity covering the following aspects:-
1. Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
2. Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.
3. Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. It would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.
4. Variety
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity
5. Tax Benefits
Income tax exemption and been ensured for Mutual Funds. Investors are eligible for deduction under section 80L of the Income Tax Act in respect of the dividends from units of shares of Mutual fund and under Section88 in respect of contributions made by investors to unit linked insurance plan of UTI and LIC Mutual fund .
6. Regulations
Securities Exchange Board of India (“SEBI”), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Thus this type of regulation seeks to protect the interest of investors.
7. Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
8. Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
9. Low Costs
Investing in the capital markets because the benefits of scale in brokerage, Mutual Funds are a relatively less expensive way to invest compared to directly custodial and other fees translate into" lower costs for investors.
10. Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-ends schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.
11. Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
12. Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.