In today’s era, everyone is conscious about their investment. Everyone wants to make a good wealth by investing in one way or the other and it is the right thing to do. Mutual funds are one of the most popular options in today’s era, but do you know the advantages and disadvantages of mutual funds.
Before investing in any medium, it is very important to know what are the advantages and disadvantages of that investment.
Through this article, first of all we will talk about what are the benefits of Mutual Funds. After that we will talk about the disadvantages of mutual funds. After this article, you will be able to decide for yourself whether you want to invest in mutual funds or not.
Advantages and Disadvantages of Mutual Funds In 2022
Advantages of Mutual Funds
1. Facility of Professional Management
Whenever you buy a mutual fund, some money is deducted from your amount in the form of expense ratio. With this money, some part is given to a professional fund manager to manage your portfolio. The fund managers here with their knowledge and experience try to get higher returns with less risk for you.
As you know the expense ratio is very less. You can get the services of a professional for this very little cost. The reason for the low cost in mutual funds is that many people invest in a fund together, due to which the cost of managing that fund is divided among all the individuals.
2. Option to invest with less capital
If you want to invest directly in the stock market then you will need more capital. But you can take advantage of the returns of the stock market by investing in mutual funds with very little money.
The biggest advantage of mutual funds is that you can start a SIP with ₹500 or ₹1,000 as well. Even if you want to do Lam Sum, you can get Lam Sum from ₹ 1000 to ₹ 5000 according to your budget. You do not need a lot of money in this. Also, you will not have to wait to invest that when your income is high then you will invest.
3. Helpful in achieving goals
Through Mutual Funds, we can achieve our goals by investing systematically. These are considered to be the best benefits among mutual fund benefits.
For example, you can build a portfolio by setting goals for buying a car, buying a house. There are thousands of schemes available in the market, among them you can invest according to your investment needs and goals. You can achieve your goal by investing in the best mutual fund according to your goals.
4. Good Return and Power of Compounding.
The biggest advantage of investing in Mutual Funds is that you get high and attractive returns in comparison to other investments in Mutual Funds.
Here you also get to see the power of compounding. The longer you hold your investment, the faster your returns will grow. SIPs are very popular because of their power of compounding.
5. Facility to invest in different types of schemes
There are many types or categories of mutual funds available in the market. Among them, you can choose any scheme according to your risk profile. You can choose the mutual fund scheme as per your requirement and goals.
Mutual Funds have options of schemes like Equity, Debt, Hybrid etc. Suppose you want to get good returns with risk then you can go with equity fund. Such investors who need very less risk can opt for debt funds.
6] Diversified Investment
One of the major advantages of Mutual Funds is that they invest your money in different sectors and assets, thereby diversifying your investments.
Suppose there is a recession in any sector like banking or auto sector, even then it will not make much difference to the entire portfolio because there will be little investment in this sector, which will not have any significant effect on the entire portfolio.
7. Easy to Invest
There are many investment options in which the process of investing is very complicated. But the answer to ‘how to buy mutual funds’ is very simple. You can easily invest in mutual funds yourself through the website of the asset management company, a mobile app or through an agent.
Nowadays many such platforms have been launched through which you can buy schemes of many mutual fund houses from one place such as groww app, Kuvera app, Cams etc.
Not only this, you can also easily compare and track the growth, returns etc. of your mutual fund scheme. Online investing has made investing in mutual funds even easier.
8. Low Cost of Investment
To invest you have to pay fees only in the form of expense ratio which is very less. Expense ratio remains around 1 to 2!^. In this way a professional fund manager manages your money at very low cost.