The Merits and Demerits of Investing Your Money in Mutual Funds in India
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Benefits of Mutual Funds in India
The Benefits That Mutual Funds Offer in India Are as Follows:
- Professional Asset Managers Manage the Mutual Funds
The fund house assigns asset managers, also referred to as fund managers, to run the mutual funds of India. One of the best advantages of mutual funds is that they know how to find the top investments that will yield the highest returns.
The Risk is Reduced by Investing in Multiple Stocks.
The funds in mutual funds are invested in various sectoral stocks. Thus, losses incurred within one asset class are covered by the profit earned by another asset category.
Liquidity
A benefit of investing in mutual funds often overlooked is the liquidity. Mutual funds can be purchased and traded at short notice at any time during the day; consequently, they are considered highly liquid.
Mutual Funds Are Low Cost
Mutual funds from India are also low-cost. Fees for managing funds for mutual funds range from 1%-2.50 %. The mutual funds, although relatively low-cost, will offer higher yields. They calculate returns based on the total amount grown in the specified period.
Tax Advantages Are Also Provided by Mutual Funds.
Suppose you are about to open mutual fund account online India. In that case, you will be happy to know that investing in mutual funds based in India through the equity market may give you tax advantages. These investments in ELSS are exempted from tax under section 80C of the Income Tax Act up to a maximum of Rs. 1.5 lakhs.
Mutual Funds are Affordable
Investing into mutual funds as early as an initial sum, like one rupee, is possible. 500. You could choose the SIP or lump sum investment in line with your budget.
Secure and Transparent
Mutual funds' investments are incredibly transparent. The mutual fund industry is within the jurisdiction of SEBI and must provide the necessary information. Valuation of stocks, past results of the fund, fund manager's experience, and their track records are available. The NAV (net value of assets) that the fund has is updated daily all day.
The Disadvantages of Mutual Funds in India
There are many disadvantages of mutual funds. We have discussed a few of them in the following sections:
Costs
Certain mutual funds from India are expensive to operate with the funds. You'll pay exit fees if you withdraw before the specified time frame. The amount cannot be withdrawn within the specified timeframe.
Diversification of Funds
While the diversification of money can prevent the risk of losses, it could have a negative side because it could hinder you from making huge profits. Specific sectors generate huge returns, so not investing much in them could result in an enormous loss.
Lock-in Time
The lock-in duration can result in a significant negative as taking your money out within the stipulated period is impossible. In an emergency, you cannot take out your investment, which can be the worst limitations of mutual funds.
Variable Returns
Returns from mutual funds aren't assured as they fluctuate under market circumstances. Thus, investors must know the fund's risk profile before investing.
If you are thinking about your hard-earned money in mutual funds, this list of merits and demerits can help you make a wise decision. For financial advice on the share market and securities, contact Aaditya Weathon today.
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