After Demonetization, many banks lower the interest rate for the Home Loan as they have the surplus cash in hand which makes easy for the person to purchase the home at cheaper rates.
The decrease in the interest rates also results in the lower return rate from the different government and bank related investment instruments like Fixed Deposit, Recurring Deposit, PPF etc.
So these safe deposits and longterm investment plan will not be going to fulfill the one’s retirement plan. If we look into the other investment option, first we come up in the mind of the Equity investment which provides the good returns since a decade.
The Market went up around 400% from 2008-2009 till the date I am writing this blog.
It is the safe investment? How should I know which companies perform better in future? How should I get the terminologies/approach/knowledge related to the market?
These are some common question which arises while thinking of the Equity investments from the individual’s mind.
So for all of the above questions we have the only solution for this are Mutual Funds.
What is the Mutual Fund?
A mutual fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds, and other securities.
All the mutual funds are registered with SEBI. They function within the provisions of strict regulation created to protect the interests of the investor.
Major benefits of investing in mutual funds:
One of the biggest mutual fund AMC provides the below advantages to investing in:
- Mutual fund investments are more or less stress-free: Investments are always surrounded by a degree of uncertainty. An investor is scared of investing due to lack of adequate knowledge & time, self-discipline, or investing experience. Mutual funds fit in perfectly in this situation as they have an inherent design to tap professional expertise to manage investments which, in turn, relieve the stress of the investor.
- Mutual funds offer diversification: Diversification of assets is a rule for both large and small businesses. This is done so that an unexpected loss by a collapsing stock will have a minor effect on the rest of the portfolio. Without a mutual fund, the investor will invest their little chunk of investment in one or two stocks thus exposing oneself to a higher amount of risk.
- Mutual funds offer tax benefits: Mutual fund investments which are held for long-term (12 months or more) qualify for capital gains 7 are taxed accordingly. Mutual funds also have a benefit of indexation.
- Mutual funds have liquidity: In open-ended mutual funds, an investor has an option of redeeming all or a part of their investment at any given time to get the current value of the stocks held. This process is standardized which makes this procedure efficient & fairly quick so that the investor can get their money as soon as possible.
- Mutual funds are transparent: The performance of a mutual fund is reviewed regularly by several agencies, publications & professionals. This makes it easier for an investor to compare different funds to each other. As an investor in the fund, one is provided with regular updates like monthly account statements, monthly and half-yearly portfolio disclosure etc.,
If we talk about the percentage of the return generated by Mutual funds in last 5 years has been double or triple the money you have invested.
Find below return from last 5-year tenure of different mutual funds.
So these are the some of the benefits of the mutual fund investment. But still, you are in confusion that which mutual fund should I choose to invest for.
So stay tuned with us for our next blog for the same.