Mutual Fund Sahi Hai: A simple investment tool for all…!!
The private sector mutual fund industry has completed a quarter century last year. But it has gained popularity and acceptance in the last one decade. As India opened its capital market in the late 90’s, investment has seen an exponential growth. Earlier the rate of participation of Indian public in the capital market was quite low, as most of the people didn’t have deeper understanding about it. But things have changed, as rising awareness among investors and a new educated middle class which is showing keen interest in capital markets. The trend is likely to continue in future. There are various investment products available to the investor. One such simple investment product is Mutual Fund.
Mutual Fund is one of the simplest investment products available in the market apart from traditional government schemes. For an early investor, it provides the best way to get introduced to the capital market. Through this, one gets to know about what opportunities are available in the market. Apart from that, there are various reasons for any common investor to invest in the Mutual Fund or to know why Mutual Fund Sahi hai :
- Risk Diversification:
Every investor knows there is always up and down in the market. Certain sectors perform better during a specific period and may go down in another period. So, the chance of getting better returns by investing in a single class is quite rare. Hardly there is any other product which allows diversification in less capital. It’s one of the best benefits of mutual fund. It helps an investor to diversify unsystematic risk by investing in a diversified portfolio of stocks across different sectors.
- Investment expertise not required:
Apart from traditional asset such as gold, real estate and cash, investment in any other domain requires a lot of expertise whether it’s stock market, bond market or commodities. Whereas the mutual fund is managed by professional fund managers, who have enough experience and expertise in picking the right fund to get the best risk adjusted returns. That’s a reason the tagline like Mutual Fund Sahi hai is appealing to the common investor.
- Variety of products:
Mutual fund offers a variety of products to suit the respective investor risk profile and distinguish investment objectives. Apart from equity funds, there are also other funds such as balanced funds, monthly income plans, income funds or liquid funds for different kind of investor.
- Disciplined investing:
The stock market may go up and down with time. It can force an investor to buy and sell in a short time period either due to fear or greed. Frequent trading can lead the investor to incur losses, while mutual fund encourages investors to invest for a longer period, which is a key prerequisite to create wealth. Furthermore, with the help of Systematic investment plan, it encourages investors to become a disciplined investor by investing according to market conditions by following a simple strategy of buying more when the price is down, sell when the price is up.
Let’s look at the chart of RBI to know more about Indian investor and how they invest
This chart simply shows that apart from bank deposits and life insurance (which are still most trusted means of investment in India), Mutual Fund is rising and contributes as the third largest investment tool for Indian middle class. In the coming future, the trend is likely to continue so does the tagline of Mutual Fund sahi hai, as Indian economy moves from developing one to developed one. We will see the fixed income rates going lower in the upcoming decade and the share of the mutual fund will keep rising.
*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.