Why Are Mutual Funds Ideal for Beginners?

by Shreya Paliwal Mutual Fund Financial services

Investments are necessary to grow wealth. Besides earning for your family, you should learn to save and understand its importance. Saving is a habit you cannot enforce. But you can always set an example for your family by being an intelligent investor, explaining the importance of investments, and setting achievable goals.

A Mutual Fund is an investment vehicle that pools money from different investors to buy financial securities. It invests in various marketable assets following each scheme’s declared investment goal. Nowadays, every financial organisation is offering investment guidance to amateur investors. Consider these reasons for investment:

1.      Provides Diversification

Diversification is one of the greatest advantages of investing in Mutual Fund schemes. You buy one fund and immediately get access to hundreds of individual stocks or bonds. By segregating your wealth in various areas, you earn decent returns even if one of them is volatile.

2.      Managed by Professionals

Due to the lack of resources and knowledge, most beginner investors cannot buy individual stocks. Professional management becomes an inevitable tool. It takes time and a lot of thought to invest in Mutual Funds. Fund managers and analysts monitor the client’s portfolio and offer financial advice that fits their situation. You only need to put the money into a scheme based on how much risk you can take and your investment horizon.

3.      Flexibility

Mutual Funds are flexible. You need not invest significant amount of money. Based on your cash flow, the fund houses provide tools like investment calculators to offer an estimate. If you draw a stable monthly salary, you can opt for Systematic Investment Plans that invest a fixed amount monthly or quarterly, based on your budget and convenience.

4.      Accessibility

Mutual Funds are easy to access and invest in from any part of the world. Companies focusing on portfolio management offer stocks and distribute them through brokerage firms, Asset Management Companies, agents, banks, etc. As an investor, you can visit the website or download the app for convenience.

5.      Safety and Transparency

Mutual Funds are available publicly, assuring investors get everything they pay for. You can track your underlying securities and find all the information on the company portal. These include Bonds, Stocks, cash, or more. They are a safe investment vehicle. No Mutual Fund house gets away with your money because the Securities and Exchange Board of India regulates it.

6.      Liquidity

You can redeem the securities anytime. Mutual funds consider a pre-exit penalty while closing the stock or fund. There are emergencies where you require a constant flow of capital. You can withdraw cash quickly, making Mutual Funds a better investment plan than real estate, Fixed Deposits, etc.

7.      Wealth Creation

Every investor wishes to make the most out of their investment. Mutual Funds allow you to build wealth systematically. They are also the best option for beginners. You should consult a financial advisor, discuss your concerns, and select the funds based on your risk appetite.

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Created on Jul 27th 2022 02:49. Viewed 60 times.

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