Indians reflect a very good characteristic in terms of saving their income. Indian people save about 30% of their earnings. Therefore, Indians have become pretty smart to maintain their savings ratio. The savings ratio in India is much better than most other countries in the world & is termed as excellent. However, in terms of investment the scenario is totally the opposite way.
Many investors get baffled when they need to take a call on the right investment decisions. This happens when you don’t have a complete knowledge of the product’s features. Also it is important to know the risk factors attached with the product.
Further in this article you will understand that why should you invest in mutual funds & what benefits you can get.
First let’s have a look as to where major portion of the population of India invest their funds into:
Where people invest?
There are around 80% people in India who invest in options like Fixed Deposit in banks, Postal Schemes & contractual insurance products. The reason is that these products are believed to be safer & secured. However when you closely analyze, 85% of the investment in such traditional forms is doubtful to strike inflation post tax during the long term. This shows the lack of investor’s awareness for the same. Also the advice that exists is of poor quality. Around 50% of agents restrained themselves to canvass mutual fund business. This is due to low commission rates in mutual funds. Recent data also shows evidence that there is decrease in the numbers of life insurance agents due to lower commission rates in ULIP product.
Mutual Fund is best option
Investors constantly look for a good investment opportunity. This opportunity is something that can fetch good returns as well as the investment must be safe & secured. According to the current system of financial distribution & quality of advice accessible in the Indian market, Santosh Sahu has a firm belief that Mutual Fund Investments can prove to be very beneficial to the investors.
Mutual Funds work on a model where funds from general public are collected & pooled in various debt & equity instruments. This is done as per the objectives stated in the offer related document. Hence, you must always read the offer related documents carefully.
Mutual fund is not an equity investment. Mutual Funds offer 100% debt as well as 100% equity facilities. Also it offers hybrid products with the combination of equity & debt. Mutual Fund’s innovations with Gold ETFs & Gold Funds are better options than physical gold. Recent history of this sector displays the quality of performance in different areas of the market. Mutual Funds schemes depend on market changes & do not offer any return guarantee. This is the major reason that prevents most investors to invest into the mutual fund schemes. However, if one understands how these schemes work & perform over a span of time, it will provide them with higher returns. One really needs to analyze carefully the risks attached to the same. Debt as well as equity schemes have outperformed other asset classes in the long run. Also they beat inflation with a large margin.
Advantages of investing in Mutual Fund schemes
Mutual Fund Industry smoothly regulates under the norms of SEBI. Every executive of a Mutual Fund has to necessarily pass an exam in order to sell the products. He is well trained by the AMC`s associates.
Mutual Fund schemes can be easily evaluated. This is because the objective is well- defined with good terms. One can know the details of the risk factors contained in the scheme easily. All he needs to do is read the offer related document or KIM (Key Information Memorandum) carefully.
You get the advantage of diversification after you invest in mutual fund schemes. You can enjoy the profit of diversification across different sectors of stock market. Diversification decreases the investment risk & gives better returns in the long run.
You can take help of professional management. These professionals in the industry are called as fund managers. These managers can manage your funds efficiently to provide good returns.
The process to invest in a mutual fund is simple & the schemes have high liquidity.
You can begin with an SIP of Rs. 500/- & get the benefit of long-term investment in equity.
Systematic Investment Plan or SIP option in mutual fund is better if you want to invest in equity shares in the longer run. This will benefit you with rupee cost averaging. This process will lower the average cost & you get the benefit with power of compounding.
MIP & Balanced Fund are hybrid products within mutual fund schemes. These are really good fresher’s who want to invest in equity market.
Mutual Fund schemes display transparency throughout. NAV is calculated on a daily basis. Portfolio of schemes is available every month. Many agencies rate mutual fund schemes which depend on the underlying risk & reward factors. Hence, you can easily evaluate & decide the best option for you.
Mutual Funds are the most tax efficient options available in India. This is because investment in any asset class for span of more than a year is taken as long term for tax purpose.
Direct Plans are also available in all categories in mutual fund schemes. These options eliminate the distributor & reduce the overall cost of around 0.45% to 0.65% p.a. This will automatically increase your return over a period of time.