Some Major Reasons To Invest In Mutual Funds


Feb 7, 2020

Diversified investment– Your funds are diversified and invested in a wide variety of stocks. When one stock encounters some change, the output of the other stock must balance it. Also, it is advised not to invest your funds in a single category of mutual funds, but to diversify it to reduce risk.

Not all investments do well at the same time. Holding different types of investments can help offset the impact of poor performance while leveraging the rest of the earning potential.

Secured future– When investing in a mutual fund, you are actually committed to investing a certain amount of your earnings or savings in a systematic investment plan, where you have been accumulating your money continuously for many years. It helps to secure your future, where every month you are disciplined to add some value to your plan. That becomes your fixed monthly expenditure, while the remaining amount you have left is your other expenditure. It ensures that you save the number of your earnings that will help provide you with a secure future regardless of all the miscellaneous expenses you have incurred. Your amount is intact and will continue to grow for the better future.

Professional management– You may not have the skills and knowledge to manage your own investment or would like to spend your time. Mutual funds encourage you to pool your money with other investors and leave specific investment decisions for a portfolio manager. Portfolio managers to decide where and how to buy and sell investments in the fund.

Flexible withdrawal– While almost all investment instruments hold your money for a specific number of years, it makes it really difficult for you to withdraw funds in case of an emergency. Mutual funds provide your invested money with liquidity benefits. However, you can withdraw your money in the plan as long as you want. Nevertheless, it is best not to withdraw the funds before maturing in compliance with the terms of the investment plan.

Easy to buy and sell– Mutual funds are widely available through banks, investment firms, credit unions and trust firms. If you need to use your funds then you can sell your fund units or shares at almost any time. But you can get less return from the investment.

A variety of funds can be used to meet different types of financial goals to choose from:

  • A young investor with a steady income and many years of an investment may feel comfortable taking more risk to get more potential returns. They will invest in equity funds.
  • A mid-career investor will be able to invest more in a balanced mutual fund that buys a mix of stocks and bonds.
  • An investor approaching retirement may be less risk-averse and more willing to invest in fixed income. They can invest in bond funds.

Note: Before deciding on a mutual fund, find out how it fits in with the rest of your investments and your overall financial goal