Mutual funds are financial instruments that collect money from investors and pump them into a varied range of securities including bonds and stocks. These securities are picked keeping investment objectives in perspective. Mutual funds are managed by Asset Management Companies that engage fund managers for this job. Investors need to pay a fee to the AMCs in exchange for their services.

The popularity of mutual funds in India is mammoth! Believe it or not, as per data released by the Association for Mutual Funds in India or the AMFI, the MF industry has crossed 10 crore folios as of May 2021 and the numbers continue to climb! If you are contemplating being part of this joyride too, here are some reasons why you essentially should! 

Why Invest in Mutual Funds in India?

Risks are Balanced Out

Risk diversification is one of the most relevant advantages of investing in MFs. Investing in stocks involves three kinds of risks, namely, market risks, sector risks, and company risks. Sector risks and company risks together form unsystematic risks. With a diversified MF portfolio, unsystematic risks are also diversified. Risk exposure is limited to market risks. It always advisable to go through the offer document carefully before investing. 

Make a Modest Start

You can begin to invest in mutual funds with small amounts. Since the funds pool in money from various sources, investors can enjoy ownership of a diversified portfolio with relatively smaller capital outlays. Building a diversified portfolio comprising various stocks, on the other hand, will require huge investments! With MFs, a sum of Rs.500 is enough for a great start!  

Transaction Costs are Lower

With mutual funds, transaction costs are lower owing to economies of scale. These funds buy and sell stocks and bonds in huge volumes, balancing out transaction costs per unit. Transacting securities through retail investors can end up costing much more. 

Investors can Rely on Fund Managers for Expertise

Mutual funds in India are managed by fund managers who are qualified and possess the desired experiences and expertise for the job. They are responsible for picking the right instruments for the best returns. Investors do not need to know much about industry sectors or financial markets. Investing personally in stocks or bonds on the other hand, will require knowledge and expertise, making matters highly risky for newbies. 

Varied Investment Modes on Offer

When you look for mutual funds online, there is a wide range of flexibility both in terms of withdrawals and investments. One can opt for one-time investing through a lump sum, one can also opt for a systematic investment, systematic transfer or systematic withdrawal plans!  

Plethora of Products on Offer

Apart from regular equity funds, one can also invest in debt funds, hybrid funds. tax saving schemes, liquid funds, and so on for suiting the different kinds of investment goals.

Mutual funds online are highly flexible and easy to manage. However, it is important to start with smaller amounts and scale up investments with your income. Understanding more about market risks is advised.