Mutual funds are more than investment vehicles for your money – they also help tax planning, risk management, wealth creation, long-term financial planning, etc. They provide:
Professional Management
Various Asset Management Companies have hired senior fund managers with years of market experience to manage the pool of funds collected through mutual funds. These fund managers use their expertise to ensure the optimum utilization of the resources and make the best use of investments, given the market fluctuations. The fund manager function includes research and election of securities to construct a portfolio and take care of various administrative tasks like collection of corporate benefits (for example, rights issues, buybacks, dividends, interest payments, etc.) same. Apart from being highly efficient and effective, these fund managers are subject to strict regulation from the Security Exchange Board of India (SEBI), which ensures investors’ safety.
Diversification and Risk Management
Many investment opportunities are available to investors to grow their wealth. But with a limited amount available to invest, an average retail investor can’t utilize these opportunities. Mutual Funds as an investment vehicle consist of multiple asset classes with equity, debt, gold, and alternative investments, which helps diversify a portfolio. The diversity also helps reduce the risk
Tax Savings and Tax Deferrals
Equity-linked Savings Schemes provide a deduction of up to Rs. 1,50,000 from their income that is liable to tax. The “growth” option in mutual funds reinvests the income earned by the particular fund and helps the investor save tax.
