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Guide to Mutual Funds

Advantages of Mutual Funds

One of the most common questions asked by investors is why should they invest in mutual funds? To answer this question, let us discuss some of the advantages that mutual funds bring to the table. 

Professional management of funds

Not all of us have adequate knowledge or information on where to invest and how. The world of financial markets is vast and risky. Choosing the right market to invest in, the right time of exit and entry, the right securities as per one’s risk profile is of prime importance. 

Mutual funds provide us to benefit from the expertise of a fund management team that have proper experience, knowledge, and education in the field.



Mutual funds provide us with the opportunity to have a diversified portfolio. We can choose from equity funds, debt funds, money market funds, gold funds and many others. Moreover, as per their inherent structure, even equity funds have to invest some part of their portfolio into debt instruments. So, by nature they are diversified. This allows our portfolio to participate in different kinds of markets. 



While investing with mutual funds, you can choose the level of liquidity you want. If you don’t need the fund for a particular period, you can opt for close-ended mutual funds. However, if you want to enjoy the ability to redeem anytime, you can opt for open-ended mutual funds. However, an important factor to consider in terms of liquidity is the entry and exit load, a fee charged by some mutual funds.



Mutual funds offer the flexibility of choosing how much to invest and when. The minimum amount for a lump-sum investment is ₹5,000. Thereafter, you can make an additional purchase with ₹1,000 only. 


If you want to opt for the SIP route, you can start your investment with as low as ₹100 per month. But generally speaking, the minimum monthly SIP amount for most funds is ₹1,000. 


For both lump sum and SIP, you can also choose when  you want to invest. In the case of SIPs, you can get several options of dates for deduction of the SIP amount. If you are a salaried individual, you can opt for a date after your salary credit to plan your finances well. 


Planning for financial goals  

You can plan for various financial goals through mutual funds. If you have a fund which you need 2 weeks later, you can opt for a money market mutual fund. If you have a fund, which you don’t need for 5 years, you can opt for an equity or debt mutual fund. Literally, there’s something for everyone. Mutual funds make financial planning easy and convenient. 


Hassle-free investment

Last but not the least, investing in mutual funds is hassle-free. You need to complete the Know-Your-Customer (KYC) requirement when you start investing for the first time. And thereafter, you can simply go online and invest in a matter of seconds. Redemption is also completely online and doesn’t take more than a few seconds. The money is credited to your account between 1-3 working days, depending on the type of fund. 

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