Mutual funds give small investors to access professionally managed portfolios, diversified portfolios of bonds, equities, bonds and other security investments. It is unlike equity trading, here the trader will gain or lose as according to the pool of traders. Hence mutual funds are having a unique niche as compared to the other investments.
In all investments options the mutual funds are the thunderstrucking year by year, due to following advantages:
Inflation master: Inflation indicates a general rise in the price of goods and services. Even though, Indian market declined its inflation from 10.92% (2013) to 5.91% (2016), but considering all figures of poverty ratio and purchasing power parity inflation rate stood above the average. Mutual fund beats the inflation by adjusting its value of rising prices of goods in the economy. Hence, fixed deposits or saving from the bank account does not get inflation benefits after its return. Hence, purchasing power parity of the people will not get affected. The equity investments don’t provide an inflation adjustment as they entirely depend on demand and supply generated by the traders.
Cost effective: The investment in the other sections like capital market requires the higher capital to do trading for a long time, because of its higher costs in trading charges and brokerage charges. But in the mutual funds the charges offered are less, which makes mutual funds cost effective. Unlike in the equity trading, mutual fund gains or losses as according to the pool of investors, hence cost incurred in case of loss is less as compared to the other investment options.
Liquidity: The mutual funds are of three types, open-ended, semi closed and close-ended. The open-ended mutual fund offers the instant liquidity based on the value of net asset of that time and close ended mutual funds can be traded in stock markets as offered by the stock market. But as in the bank fixed deposits are having fixed deposit term, as a person cannot change his ways.
Diversification in portfolios: unlike equity or forex market, a mutual fund offers diversification in the portfolio. Due to its diversification, the mutual fund offers investment, this makes it to generate higher earning year by year and lessen the loss as compared to equities or forex markets.
Safety and transparency: mutual funds are safe and transparent. It is unavoidable that, every instrument in the stock market is based on the risk factor. But mutual funds are managed by the skilled experts and it is regulated by the Stock Exchange Board of India (SEBI). Unless putting money into unorganized sector, where risk is high, one can go with mutual funds.
Research and development: Backed by a dedicated research team, investors are provided with the services of an experienced fund manager who handles the financial decisions based on the performance and prospects available in the market to achieve the objectives of the mutual fund scheme. As the equity or forex markets does not get supported by the research team because as the investment is not going to pool of investors.
Comfortable: mutual funds are time savings, higher return, less risk and transparent instrument that makes people to be in a comfortable position. Here the cost is less, hence provides less transaction costs, makes a trader to get more earning per investment as compared to the other investment options.
Author: Editorial staff of 70trades reviews blog