In the past, people used to save more and invest less. However, today the new generation is looking for new ways to invest their money so that they can secure their future financially. A mutual fund is one of the most preferred ways of investment.
A mutual fund is basically the money accumulated by many people to invest in the assets like equity, bonds, shares, and other assets. The holding of a mutual fund is termed a portfolio. Investors buy units in the mutual fund, which determines their ownership in the fund.
There are many benefits of investing in mutual funds, and these benefits have made mutual funds a popular option among investors. Here are the top reasons why mutual funds are getting popular:
- Future financial goals – Small investors know the importance of financial planning. Mutual funds allow them to build a huge corpus over a longer time duration. This enables them to take the associated risk. Small investors are also getting benefitted from the systemic investment plans (SIPs), which give them the double benefit of rupee cost averaging along with wealth creation. You can use SIP lumpsum calculator or mutual fund lumpsum calculator to find out how much returns you will get after a few years.
In addition, there are professionals who control and manage the collected funds from the investors. They know the ins and outs of the market and have the knowledge needed to invest the funds in the right place.
- Tax savings – Mutual funds are tax-efficient. Short-term gains, when the investment is held for up to 1 year, are taxed at a 15% rate, whereas long-term gains, when the investment is held for more than one year, are completely tax-free. If you invest in ELSS, you are exempted from tax under Section 80 C of the income tax act.
- Easy liquidity – Investing in mutual funds allows you to buy and selling of the units. In an open-ended equity fund, you can also get your money back anytime. The process of getting money back to your bank account may take three days to 7 days.
- Investment in multiple assets – Mutual funds give you the option to invest in multiple assets that diversifies the portfolio. An investor can invest in many different assets with the minimum amount after using a mutual fund calculator. Investment in different assets offers you better returns, and it also safeguards your money from the fluctuating stock market. You can use a lump sum calculator to determine how much return you will gain depending on your preferred portfolio.
The mutual fund enables the investors to diversify, which distributes the risk over a number of investments. Mutual funds also give the opportunity the investors to invest in funds that are professionally managed. Unlike individual investors, professional fund managers do not succumb to emotional investing driven by fear and greed. Today, there are many mutual funds available that cover the wide range of interests and needs of investors. Mutual funds are one of the easiest methods to start investing for a secure future.