A mutual fund is one of the most misunderstood financial products. However, the reality is that it is an excellent investment vehicle for establishing long-term wealth. If you are wondering what mutual fund benefits are, then this article is for you. You get to enjoy a host of different advantages ranging from convenience to liquidity.
What are the benefits of investing in mutual funds?
No matter what type of mutual funds you invest in, you get to enjoy a certain set of benefits. Here are some of the most significant ones.
Diversification
Due to the fact that mutual funds pool funds from multiple investors and invest them in various stocks and securities, you are able to diversify your investment. Additionally, mutual funds reduce the risk that you will lose a significant part of your investment due to headwinds by spreading investment risks across multiple securities.
Liquidity
You can also enjoy a lot of liquidity by investing in mutual funds. Some mutual funds even offer instant redemption facilities, which transfer the funds to your bank account on the same day of redemption, making it very easy to buy and sell units.
Tax Benefits
It is possible to invest in mutual funds in India in a variety of ways. One of these types, known as the Equity Linked Savings Scheme (ELSS), offers tax benefits of Rs. 1.5 lakhs in a financial year in the form of deductions from your total taxable amount, allowing you to save a considerable amount of tax.
High Returns
If you invest in equity mutual funds, you can get returns that are much higher than those offered by most traditional investment options. Moreover, in addition to capital appreciation, you may also be eligible to receive dividends on your investments, which further amplify your return generation potential.
Flexibility
It is possible to customize mutual fund investments to your preferences. For instance, you can start a Systematic Investment Plan (SIP) or make a lump sum investment. Investing in a SIP again gives you the option of determining the amount, duration, and frequency of your investment.
Transparency
Mutual fund houses and mutual fund investments are heavily regulated by the Securities and Exchange Board of India (SEBI). As a result of the watchdog’s mandates and regulations, fund houses invest in a transparent manner.
Conclusion
As a result, you should now be aware of mutual funds’ benefits. Before you begin investing in one, you must ensure that you have a Demat account in your name. If you don’t already have one, you can open one for free at EquityBox. You can invest not only in mutual funds, but also in upcoming IPOs with a Demat account.
