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Mutual funds are an idea that represents the famous saying ‘Don’t put all your eggs in one basket’. The objective of mutual funds is to diversify your investments, thus making sure you don’t face huge losses from single security. Spreading your investment across various securities will help in minimising colossal damages and promotes speedy recovery. 

Mutual funds offer manifold benefits. Some of them can be found here:

1. Tax benefits of mutual funds

One of the perks of investing in mutual funds is tax deduction under Section 80C of the Income Tax Act, 1961. The deduction cannot be claimed on all the mutual funds schemes, so one must do their research before opting for any of them. The most trustable scheme is ELSS that can be deducted under the Income Tax Act. One can save upto Rs. 1.5 lakhs per annum by investing in ELSS under S80C of the Act.

2. Risk-management 

The most characteristic and attractive feature of mutual funds is diversification of risks to avoid colossal damages to its investors. Instead of investing in a couple of big shots, mutual funds spread the investment across various stocks to minimize the risks. Even if a couple of losses are endured, they will not be very difficult to overcome as the investment in that financial security is not the total investment. Hence, investments in mutual funds are less risky than investments in individual stocks. 

3. Low investment 

Because mutual funds are based on pooling money from different sources and investing them in diversified securities, the investment per source is surprisingly low. Even an investment as low as Rs 5000 is accepted, and some schemes allow investments even lower than that. So, instead of investing a huge capital on an individual stock and facing heavy losses, one can invest a smaller capital in mutual funds and earn returns from different stocks. 

4. Experienced investments 

The stock market game requires exorbitant experience so that the capital is not invested in the wrong shares. This is not something an ideal person is expected to know before investing in stock markets. Mutual fund managers are professionals who have the expertise to allot investments to the shares with highest returns. This means less hassle and more returns for you. It is best to let the professionals play the stock market games and you can earn the returns.

5. Something for everyone

Mutual funds allow the investors to choose the securities they want to invest their capital in and then let the professionals handle the stocks. There are many schemes that an investor is offered based on their preference. 

Not only equity funds, but also monthly income plans, balanced funds, liquid funds and income funds to suit your investment requirements.

6. Economies of scale

Investing through stock brokers is costlier than through mutual funds. It is because the later deals in greater volume of stocks, so per unit cost is lesser. 

Investment in mutual funds is the best choice for you if you want to earn great returns with less capital. 

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