Mutual funds are one of the popular investment vehicles in India. A Mutual fund is an investment company which pools money from various investors and invests the money in different investment channels to generate profits with earning income on capital gains and dividends on equities. Generally these are the most valuable investment tool for the new beginners in the stock markets. Let us see the benefits of investing in mutual funds:
Professional Management: This is the main advantage of investing in Mutual funds. Many individual investors choose mutual funds for investment because these funds are effectively managed by the professional fund managers. Mutual fund companies hire full-time, high-level professional fund managers. The fund managers have real-time access to market information by which they will execute trades on the largest and most cost-effective scale.
Diversification: Diversification is most important and plays a vital role in portfolio. However, the beginners do not have enough knowledge to properly allocate their assets. Mutual funds invest a large part of the pooled money in broad range of securities. This gives low investment risk by reducing the effect of a possible decline in any one of the securities.
Liquidity: Mutual funds offer high liquidity as you can get back your money at current net asset value. Any fee and charges may be assessed on the redemption at any time.
Choice of schemes: There are a variety of schemes in mutual funds. You can have a number of choices in choosing schemes but the overall decision of investment is in the hands of fund manager.
So, mutual funds can be a right investment option to new investors. But these new individuals must do research on the mutual fund companies before taking an investment decision in a particular company. They have to study the past performance and the schemes that are offered in the documents. There are many websites that give information about all the mutual fund companies in India. You can decide which is suitable to you.