In recent years, people are shifting towards mutual fund investment rather than investing in traditional means in real estate, gold, silver, etc. The reason is extremely clear and simple. In the long term, the mutual fund has the potential to give better returns than that real estate properties. In addition, it can be easily liquefied, like gold and silver. These are the primary reasons behind the increasing popularity of mutual funds. Sometimes a question arises in our mind, “what are mutual funds?” In a mutual fund, the manager invests your money in equity, gold, silver, and bonds.
Now you may be thinking to invest in a mutual fund. But before investing in a mutual fund, you need to understand the schemes of mutual funds and how it works. Apart from this, you don’t understand your motives before investing in a mutual fund.
There are a few factors behind investing in mutual funds. Investors like to invest in mutual funds due to a variety of reasons as it can decrease the risk, be managed by an expert professional, affordability, transparency, and easy liquefication.
- You know that in any mutual fund, the invested amount is allocated to different sectors like gold, silver, bonds, and equity. Since the investment is diversified, the risk involved can be decreased. The fund manager actively manages the fund and helps the investor to receive decent returns.
- Mutual funds are affordable. Due to its affordability, almost all sections of society can invest in it. You can initiate a sip of as low as 500 bucks, and your SIP can tackle the market volatility. Well investing in a mutual fund can be cost-effective and stable.
- Like gold and silver, the mutual fund can be sold in the capital market, and the amount will be received, within two days after that transaction period. Finally, mutual funds are under constant surveillance by government authorities. So mutual funds are less volatile and transparent.
There are objectives of the investors to invest in mutual funds. People invest in mutual funds for saving tax or achieving their short-term and long-term goals.
- Well investing in mutual funds can give you the scope to save tax. According to section 80c of the income tax act, tax saving is applicable on a maximum amount of 1.5 lakh, if it is invested in equity linked saving scheme or ELSS mutual fund. It is the responsibility of a citizen to pay taxes to the government as per the income tax slab. If your income is more than you will have to pay greater taxes. You can have the option to save tax legally, by investing in ELSS mutual funds.
- To calculate the return, you can approach mutual funds from a dividend and capital gain appreciation perspective. In case of a short-term goal, the investor can invest in dividend-giving mutual funds. If the investment plan is for the long term, capital gain appreciation is preferred.
Conclusion
In the 21st century, mutual funds are renowned sources of investment. If you are considering how to invest in mutual funds, simply follow the pointers in the blog, to reach your objective.
