Why Everyone is talking about Mutual Funds?
Last Updated on April 21, 2021 by Chitale CFS Pvt Ltd
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities like stocks, bonds, money market instruments, and other assets.
A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Investing in Mutual Funds is the easiest way to build wealth. All Mutual Funds are registered with the Securities Exchange and Board of India (SEBI) and therefore, your investment is safe.
If you are a beginner and want to know why mutual funds can be a good fit for your investment needs, or if you are an advanced investor and need a reminder of why mutual funds may be best suited for your investment goals and lifestyle, here are some of the many benefits you need to know.
A mutual fund company has a dedicated fund manager for their schemes who designs and manages the portfolio of the scheme. One does not need to worry about the stock selection or handling the portfolio.
Chitale Financial Solutions is the one-stop solution for all your financial needs and management.
Affordable Portfolio Diversification:
Units of a scheme give investors exposure to a range of securities held in the investment portfolio of the scheme. Thus, even a small investment of Rs. 500 in a mutual fund scheme can give investors a diversified investment portfolio.
With diversification, an investor ensures that all the eggs are not in the same basket. Consequently, the investor is less likely to lose money on all the investments at the same time. Thus, diversification helps reduce the risk of investment.
Economies of Scale:
A mutual fund is a pool of money from so many investors which makes it possible to engage a professional manager to manage the investment.
It is very difficult for a small investor to engage and afford such professional management.
Large corpus leads to various economies of scale.
For example, investment research costs and office space get separated between investors. Additionally, the transaction volume is much bigger compared to a single investor which makes it possible to negotiate better terms with service providers. Thus, investing through a mutual fund offers a distinct economic advantage to an investor as compared to direct investing in terms of cost-saving
LTCG tax is applicable on equity funds if the capital gains exceed Rs 1 lakh a year.
The longer you hold onto your mutual fund units, the more tax-efficient they become. The tax on long-term gains is comparatively lower than that of the tax on short-term gains.
Specific schemes of mutual funds (Equity Linked Savings Schemes) give investors the benefit of deduction of the amount subscribed (up to Rs. 150,000 in a financial year), from their income that is liable to tax. This reduces their taxable income, and therefore the tax liability.
When it comes to mutual fund investments, there is absolute flexibility to the investor.
There are systematic plans available where money can be deposited or withdrawn regularly automatically.
An investor can start or stop the same anytime they want, the amount can be increased or decreased as per the investor’s suitability. There are also great transaction conveniences like the ability to withdraw only part of the investment, the ability to invest additional amounts to the account, etc.
Once an investment is made with a mutual fund, they make it convenient for the investor to make further purchases with very little documentation. This simplifies subsequent investment activity. We, Chitale Financial Solutions, notify our clients when there is an opportunity in the market and take care of every transaction of our investors.
The regulator, Securities & Exchange Board of India (SEBI), has mandated strict checks and balances in the structure of mutual funds and their activities. Mutual fund investors benefit from such protection.
Systematic Approach to Investments:
Mutual funds also offer facilities that help investors invest amounts regularly through a Systematic Investment Plan (SIP), or withdraw amounts regularly through a Systematic Withdrawal Plan (SWP); or move sums of money between different kinds of schemes through a Systematic Transfer Plan (STP). Such systematic approaches promote an investment discipline, which is useful in long-term wealth creation and protection.
Why Chitale CFS Pvt Ltd?
Chitale CFS Pvt Ltd offers wide variety of investment avenues for short as well as long term investment needs. With more than 30+ years of experience, we are one stop solution for a number of financial products like Mutual Funds, Insurance, Bonds, Fixed Deposits etc. We serve our clients with highest standard of transparency and integrity by putting investor’s interest first.