Why Use mutual funds to invest in equities??
Investors now strongly believe that equity is one of the best asset class to create wealth over the long term. Financial planners advise them to start investing with mutual funds to start their wealth creation journey instead of direct stocks.
What is the benefit of mutual funds as compared to investing in stocks directly?
The biggest advantage for a mutual fund investor is that he has the services of a professional fund manager, who tracks, evaluates and researches sectors and companies on a regular basis. As an individual investor, one does not have the time and the resources to research, track and identify stocks on your own. An individual may get carried away due to sentiment and may go overboard on a particular share is backed by strong research by the team.
How much amount do you need to invest in mutual funds?
You can start with small amounts in mutual funds. You can start with as little as Rs 500. There is no need to open a demat account for mutual funds. Many bluechip stocks themselves quote at a high price, making entry point in stocks generally higher than mutual funds. You can also choose to invest systematically every month using SIP route by writing a simple mandate to the fund house.
What tax benefits does a mutual fund offer as a product?
When an investor buys and sells shares before completing one year, he has to pay short term capital gains. However, in a mutual fund the fund manager may keep transacting in shares at varying points of time. If investor remains invested for more than one year in an equity fund, his gains are subject to LTCG (Long Term Capital Gains).
What liquidity do mutual funds offer?
In a bear market, you may find individual stocks could be illiquid. If you wish to sell large quantities, the price goes down or there could be no buyers. Similarly on a good announcement the stock may be on upper circuit. Such liquidity problems are not faced by a mutual fund investor. An open-ended fund can be bought / sold at that day’s NAV by simply approaching the fund house or its registrar or a distributor.
सौ. – इकोनोमिक टाइम्स