Mutual funds have emerged as one of the most popular investment destinations in India. This asset class provides security to retail investors. Average Assets under Management has peaked at a high of Rs. 17.37 trillion as of January 2017. In spite of the phenomenal growth mutual funds still lack the penetration in India that has been witnessed in other heavyweight economies such as US, China or even Western Europe. It is thus important to inculcate the healthy habit of mutual fund investment among the Indian population.
To promote the ritual of regular investing, the Mutual Fund Day is marked by the 7th of every month. Here are 6 benefits of sound mutual fund investments that can be highlighted:
a) Higher returns
Regular savings accounts give returns of between 4 to 6%. Fixed deposits rates stretch till 8%. On the other hand, mutual fund investments have been known to give anywhere between 12% to 15% over a long period of time. Mutual funds have consistently outperformed savings and fixed deposit returns in India.
b) Tax Savings
Mutual funds under Equity Linked Saving Schemes offer tax benefits of up to Rs 1.5 lac under Section 80C, thereby serving as a lucrative tax saving investment.
c) Compounding Effect
Investing via the Systematic Investment Plan route helps achieve the effect of compounding. An investment of just Rs 10,000 per month over a 30-year period, at a 15% rate of return, will grow to become a gigantic Rs 7 crores.
d) Saves time
For busy professionals, investing directly in equities is not always a great option since it requires a time investment to understand the fluctuating market. Mutual funds enable you to hand over your hard-earned money to professionals who study the market in detail.
e) Portfolio balancing
They give the flexibility of re-balancing the portfolio depending on risk appetite, age and income. It also allows for shifting between equity and debt mutual funds. This allows you to hold investments that fit your specific profile, and move between investment profiles easily. In comparison, investments in instruments such as gold and real estate are not as flexible.
f) Liquidity
They come with minimal or no lock-in periods, giving easy liquidity so that investments can be redeemed as and when needed.
The growth in mutual fund portfolios has been increasing aggressively due to industry initiatives like Mutual Fund Day – which actively encourages investors to make monthly investments in mutual funds. The initiative reminds people to invest their resources while educating them about the various targets to pursue. Through Mutual Fund Day Reliance Mutual Fund is attempting to spread awareness and build consideration towards investing in Mutual Funds to help investors realise their dreams. Reliance Mutual Fund has also conceived a Facebook application called Fund for a Friend which helps you to recommend an appropriate mutual fund for a friend by evaluating his personality.
Featured Image Courtesy: Pixabay