Why invest in a mutual fund for better benefits

Before discussing the advantages of mutual fund let us know more about it, in simple words it is a pool of money from different investors and used it to buy different stocks, bonds, etc.

Every investor holds units of the fund allocated on their name that represent their scheme of investment, their securities are selected on the bases of the objective of buying the funds and totally managed by AMC (assets management companies).

AMCs have several fund managers who are specifically appointed to manage the funds and cross-checking the fund scheme with the investment goals and objectives of an investor.

There are several benefits to invest in mutual funds let us discuss some of them:

•    Risk variegation: this would be one of the best benefits in mutual funds as compared to investing in stocks directly.

There are two major categories of risk: systematic risk and unsystematic risk which further classified into market risk, company risk and sector risk. The major difference is one is uncontrollable were as unsystematic risk is controllable. As mutual fund believes and runs on diversification, it seems to be more sustainable and less risky.

•    Smaller capital expenses: stock investor need to put the huge amount in a diversified portfolio of stock while in mutual funds due to money pooling diversification is possible within a limited amount of investment there is no need to increase the investment ratios,

Mutual fund investors may hold a diversified portfolio within the small investment of RS 5000 if they want.

•    Transaction cost economics: as mutual fund deals in larger volumes which reduce the cost of transaction on per unit but in stock investment it is much greater because they buy and sell in much lower occupancies through brokers.

•    Outlay expertise: stock investment requires a lot of experience; guidance and keen observations contrarily mutual funds are managed by the professional fund managers having sufficient experience in dealing with the right stock at the right time.

Many retail investors have lost money due to poor stock identifying skills and risk-return trade-offs.

•    Variation in products: mutual fund offer variety of investment plans based on monthly income, risk capacity of an investor, investing capital, investment objectives.

•    Modes of investments: mutual funds are investor flexible in terms of mode of investment and withdrawal. An investor may opt for a variety of modes of investment, for example, one-time investment, monthly systematic investment plan, systematic transfer plan, switching from one scheme to another is also possible in it.

•    Managed investment: stock market in heavily volatile, which sometimes compels investor for buying and selling in a shorter period of time, which disturbs the management of investment and thus sum up as low returns, but in Mutual funds, all the investments are managed and overall long term investment was calculated.

For retail investor mutual fund definitely a better option of investment it is far better than running your heart beat on the stock market, for more information on top 10 mutual funds visit rupeeyog.com.