Here's why mutual funds are considered as the best long term investment plan
Posted on: 30 May 2019 by Kelly Wilson
Mutual funds are a combination of the collection of bonds and stocks. In other words, they are a collection of debt and equity. SIP is an instrument of investment in mutual funds.
Even five years ago, people would think twice if you advised them to invest in mutual funds instead of starting another fixed deposit. Thankfully, MFs have redeemed their impression on the potential investors quite a bit, and the lion’s share of the millennial investors are looking forward to investing in a myriad of MFs instead of opening savings accounts and buying savings certificates.
Why should you consider investing in mutual funds?
Mutual funds are a combination of the collection of bonds and stocks. In other words, they are a collection of debt and equity. SIP is an instrument of investment in the mutual funds. Those, who don’t want to or have the means to invest a lump sum, can now begin investing as less as INR 500 per month in a mutual fund via SIP schemes. It is a small step towards a prosperous future.
What makes mutual funds the best investment move of 2019?
In 2019, MFs have emerged as the most preferred investment choice. The market might be volatile, but many fund houses are able to direct their investors towards smart choices that is improving the fund returns and stimulating more investors to jump on the MF bandwagon. Most importantly, investing in a MF is as easy as it sounds. It might even be simpler than buying a savings bond or opening a new account at a new bank. MFs provide several benefits to the investor, and we are here to explore the top five reasons that make mutual funds the best form of investment for everyone.
i. It gives you experience
When you want to invest in debt or equity, you need enough knowledge, know-how and research. It can be challenging for any beginner to directly invest in equity or debt without first gaining experience of the process or an understanding of the risks involved. The lack of time and expertise adds to the risks of investment. As is the market has its unpredictability and vulnerabilities. Even the best of the best algorithms and investment experts cannot predict the market behaviour accurately all the time. Mutual funds can give any novice investor the first necessary encounter with the market. When you invest via fund houses like SBI, they employ experienced and trained employees to help you out with the choices. Moreover, SBI mutual fund has expert managers backed by dedicated teams of experts and analysts to keep an eye on the market.
ii. Diversification of portfolio
When you want to become a pro-investor, you need a highly diverse portfolio. Diversification mitigates the risks by allocating parts of the investment to different sectors. For example – when you invest in a mid-cap mutual fund via SBI mutual fund investment, the entirety of your investment is spread across multiple sectors including banking, finance, technology, construction and many more. Choosing the right mutual fund can have you invest across different sectors and market caps. You will be able to diversify your portfolio across various assets, including but not limited to gold, debt, and equity. The right mix of large cap, mid cap and small cap assets reduces the susceptibility of your investment to the market volatilities considerably even when the market hits an all-time low. Diversification of your portfolio is one of the best-proven ways to ride out low market performance for any investor.
iii. They make investment easy
Investing in mutual funds is easy as long as you pick the right fund house. When you choose to invest through a fund house, you will get the service of a dedicated fund executive, who will help you fill out the documents necessary for investment. With mutual fund investments, you should be able to see which stocks and bonds you are buying or selling. SBI mutual funds offer a highly transparent transaction platform for the investors to keep an eye on their investment and its performance. Moreover, you will get a transparent summary of the fund’s overall performance, future prediction and current return rates over various periods. An experienced expert should be able to tell you how long you should invest in a particular fund for optimum returns depending on the asset allocations.
iv. They provide flexibility and liquidity
Most mutual funds have a lock-in period of around 3-5 years. It depends upon the type of fund you pick. After this period, you can sell or transfer the stocks and bonds you buy through the funds. In case of a financial emergency, you should be able to sell the bonds or stocks. The money is typically transferred within 48 hours to the registered account number. According to experts, selling bonds and stocks is much easier than selling other tangible forms of investments like real estate or gold. However, you should speak with your financial advisor regarding the tax savings before you decide to invest in mutual funds or sell stocks and bonds.
v. Expect professional guidance
When you pick a reputed fund house like SBI for investing your hard-earned money, you should expect the investment matter to be dealt by an expert only. You will get professional service and advice at each step for your investment. They are professionals who have dedicated their work-life to understanding market trends and analyzing fund performance. You should be able to find out from your professional adviser whether or not the 2019 elections will have any impact on the funds of your choice.
The secret to every successful investment plan
No matter how much risk you are taking or how aggressive your mutual fund is, you can ameliorate the risks by increasing the period of investment. Extending the investment term helps the fund level out the losses and it typically provides higher than benchmark returns on the investment.
Why should you work with a fund house?
Any veteran fund house has multiple mutual fund schemes and SIP schemes. Choosing the right scheme might seem a little daunting when working with a highly successful mutual fund investment company. For example, – SBI has several equity schemes, debt schemes, hybrid schemes and solution-oriented schemes that can confuse even the most well-read novice investor. Investing with legit fund houses is quite easy thanks to the detailed documentation of every step. Additionally, you can get help from professional investment advisors, whenever you need.
Irrespective of the investment scheme you pick, mutual funds are one of the smartest ways for creating long-term wealth. They are currently the best-performing asset classes that offer considerable tax-savings. There are certain SIP schemes in SBI that offer complete tax benefits for the investor. You should talk to your financial advisor or investment expert to learn more about the benefits of choosing a tax-saving SBI mutual fund investment.