For an old investor and someone who is starting out, mutual fund poses to be a convenient option to invest your hard earned money. In simple terms mutual funds are a collection of stocks along with bonds. The moment you invest in direct mutual funds you tend to invest a small portion in stocks along with securities. Rather than cracking your brain on which are the funds for you to buy, it is simple that you hand over the funds to a mutual fund manager and they decide which the best stocks to invest are.
Let us explain the reasons why investing in mutual fund does not seem to be a bad idea
Diversification
The moment you invest in mutual funds you own a portion of the shares or bonds. When you diversify your money, mutual fund spreads over your investment so that you do not end up investing all in one basket. You need to invest across different class of assets and even industry sectors. If the portfolio is well diversified chances of volatility becomes less in the long run.
Lower costs
Most individuals do not possess the resources, to purchase hundreds of individual stocks at the same time. To buy and sell stocks is going to take a lot of time and with relation to the research it is going to take a lot of time and even effort. As they are expected to churn in large amount of money of investors at a single go, with mutual funds you can cash in on the benefits of buying or selling size reduction the transaction costs at a considerable level.
Lower investment
Some investors do not even have the money to even buy 1 share of a stock in a nifty index. Even a considerable amount of money might not be ok for this. But with mutual fund there are no minimum amount and you can get the ball rolling with a small amount.
SIP
With SIP you can invest in mutual funds on a regular basis. This can be done for even Rs 500 and once you go on to register with a bank mandate they pull in the money directly from your bank account and invest in mutual fund. By a good investment platform it is observed that the money moves directly from your bank account to a mutual fund house.
Transparency
The amount of shares and bonds that are invested each month is shown at a public level every month as this makes you aware what the fund manager is doing with your money. If the investment channel is good they should make all this information available on the on the online platform.
Liquidity
As your funds are spread across a wide range of stocks, and even bonds, at any point of time to meet your financial obligations you can sell your mutual funds. The moment you sell the fund money hits on to your account.
With a mutual fund a viable way assures in order to meet your investment goals.
