Creating and implementing the right investment plan today is of utmost importance to attain financial freedom in the future. However, it is crucial to pick the right mode of investment for the same that suits your investment goals and risk appetite in order to reap maximum profits and minimise the risks.
If you are also on the lookout for the same, mutual funds can be a suitable investment choice. Mutual funds are equity investment instruments and offer you higher returns compared to fixed-income tools such as bank fixed deposits. In this article, we will discuss this instrument and how it can help you build a strong financial foundation for yourself.
Benefits of Investing in Mutual Funds
As of March 31, 2023, the Assets Under Management (AUM) of the Indian Mutual Fund Industry reached a staggering Rs. 39.42 trillion, a five-fold increase from Rs. 7.6 trillion in 2012. This remarkable growth in AUM is a testament to the surge in demand for mutual fund investments over the past decade.
Investing in mutual funds offers several benefits that have helped individuals achieve significantly higher returns over the long term. Understanding these benefits can help you secure a more stable financial future. Here are some benefits of investing in mutual funds.
1. The Power of Compounding
Money has a remarkable quality – it grows if given enough time. This is particularly true for mutual fund investments, where early investments benefit from the power of compounding. As your investment earns returns, these returns are reinvested, leading to accelerated growth over time.
Compounding has a snowball effect on your investment, with the returns on your initial investment continually generating additional returns. By starting your mutual fund investments in your twenties or thirties and consistently investing for the next two to three decades, you can harness the full potential of compounding to achieve a secure financial future.
All you have to do is invest in mutual funds via an investment app or open a demat account. You can also get a free demat account opening if you have done your research right. However, note that a demat account is not mandatory to invest in mutual funds like stocks. You can use a demat account for MF investment if you already have it.
2. Mutual Funds are Liquid
One of the significant advantages of investing in mutual funds is that they offer liquidity to investors. Liquidity refers to the ease with which you can convert your investments into cash when needed.
Unlike traditional investments such as real estate or gold, which can be time-consuming and complex to liquidate, mutual funds can be sold quickly and easily. Most mutual funds have no lock-in period (except close-ended funds), meaning you can redeem your investment at any time, and the money will be credited to your account within a few business days.
Moreover, mutual funds also offer a range of redemption options to suit your liquidity needs. For example, you can choose to redeem your entire investment or a part of it, and you can do so either through a lump sum withdrawal or through systematic withdrawals over time.
By providing quick access to your investment, mutual funds can help you meet unexpected expenses or take advantage of new investment opportunities without disrupting your long-term financial plan. However, do not miss out on checking the exit load and the minimum investment tenure to avoid the same.
3. Portfolio Diversification
Mutual funds offer investors a diversified investment portfolio across various asset classes and stocks of different companies. This diversification can help you maximize profitability while minimizing risk.
By investing in mutual funds, you avoid the pitfalls of concentrating your investment in one asset class or company, which could be a risky proposition. In the event of a market downturn or underperformance by one particular asset class or company, the diversification provided by a mutual fund ensures that other components of the portfolio will continue to perform well and help offset potential losses.
This diversification benefit is one of the key strengths of mutual funds in managing market volatility and protecting your investments from unnecessary risk.
Take a Mutual Fund Course
While investing in mutual funds can provide significant long-term profits, it is also essential to understand the various types of mutual funds and other technical aspects to make informed investment decisions. With knowledge comes a better chance of earning higher returns on your investment. To gain this knowledge, you can consider enrolling in an online course.
The mutual fund course offered by Upsurge.club is an excellent option that covers all the fundamentals you need to know. The course includes:
- The flexibility of mutual fund investments
- Types of mutual fund investments
- Long-form investment patterns
- Performance tracking
- Tax-saving perks, and much more
By taking this course, you can equip yourself with the knowledge needed to make smart and informed mutual fund investment decisions. It’s a valuable investment in yourself that can potentially pay off with higher returns in the long run.
Every investor wishes to achieve financial freedom. To attain this, it’s crucial to start investing early and make smart investment decisions. One such option that offers both long-term stability and high returns is investing in mutual funds. With mutual funds, you can benefit from professional management, diversification, liquidity, and flexibility, all of which can help you achieve your long-term financial goals.
By investing in mutual funds, you can take control of your financial future and work towards achieving financial independence in 2023 and beyond.