Mutual funds are a type of investment in stocks, bonds and other kinds using the money from investors.
Risk Diversification
The
main advantage of investing in the best
performing mutual funds
is risk diversification. Investing in a diversified portfolio of
stocks across different sectors is the strategy used by mutual funds.
Low Capital Outlay
As mutual funds are based on money pooled in by different people, every investor of a particular scheme can have the beneficial ownership of a diversified portfolio of stocks with a little capital outlay. Investors can have a capital outlay of as low as Rs. 5000 or even lower.
Cost-effective
Mutual funds buy and sell securities in huge volumes. It results in a low per unit transaction cost which is much less than a retail investor transacting shares through share brokers.
Expertise and Experience
Taking the help of professional fund managers who have the required experience and knowledge in picking the right stocks and making the best risk-return trade-offs, are recommended for the investors.
Modes of Investment
Mutual funds provide a wide array of flexible investment and withdrawal modes. There are various modes of investment available like lump sum, systematic investment plan, systematic withdrawal plan, switching from one scheme to another, etc. An investor can opt for the growth option of mutual funds which can be beneficial in terms of compounded returns over a long period of investment. Investment in dividend option gets you a regular income from your investment.
Disciplined Investment
The equity market is very volatile and can cause undue anxiety among the investors which can lead to buying and selling within short periods. It can cause the investor to incur losses. The best performing mutual funds recommend long term investments to investors which is vital to creating wealth. To meet long term financial goals, investors need to invest in a disciplined manner using systematic investment plans.
Choosing from a Wide Range of Funds
Financial goals for investors belonging to different categories will be different.
- A young investor with a well-settled career and regular income will have many years for investment. Such individuals may be ready to take more risk to accomplish greater potential returns and may opt for an equity fund.
- A mid-career investor would be in the process of balancing risk and return moderately. Such individuals may prefer to invest in a balanced mutual fund that is a combination of stocks and bonds.
- An investor proceeding toward retirement may not be comfortable taking the risk and will opt for fixed-income investments. Such investments are called bond fund. Browse the site for more details.
