Mutual
Funds, the globally proven investment avenue, have schemes
to suit almost every investment need and it is increasingly
recognized that investing through Mutual Fund is one of the
most appropriate and safest ways of Wealth Creation. Due to
its professional management, diversification, convenient
administration, low costs, flexibility choice of schemes,
well regulated, transparency, return potential, liquidity
and tax benefit, Mutual Funds are becoming highly popular
saving instruments.
Three Common
Investment Goals
•
Retirement
Most individuals buy mutual funds for long-term goals,
especially retirement. It is estimated that retirees will
need 70 to 80 percent of their final, pre-tax income to
maintain a comfortable lifestyle in retirement. If you
plan to retire at the age 65, retirement savings should
last for at least 17 years, since the average life
expectancy for a 65-year-old is 82, and continues to rise.
•
Education
Many parents and grand parents use mutual funds to invest
for children's college education. Your time horizon is an
essential consideration when investing for education if
you start when the child is born, you have 18 years to
invest. However, if a child or grandchild is in your
future, the time horizon can be lengthened by investing
now.
•
Emergency
Reserves and Other Short-term Goals
Emergency reserves are assets you may need unexpectedly on
short notice. Many investors use money market funds for
their reserves. Money market funds alone, or in
combination with short-term bond funds, can also be
appropriate investments for other short-term goals.
Advantages
of Investing in Mutual Fund
•
Professional
Management
Mutual funds are managed by professional fund managers who
regularly monitor market and economic trends for taking
investment decisions. They also have dedicated research
professionals working with them who make an in depth study
of the investment option to take an informed decision.
•
Diversification
Diversification reduces risk contained in a portfolio by
spreading it. It is about not putting all your eggs in one
basket. As mutual funds have huge corpuses to invest in,
one can be part of a large and well-diversified portfolio
with very little investment.
•
Convenient
Administration
With features like dematerialized account statements, easy
subscription and redemption processes, availability of
NAVs and performance details through journals, newspapers
and updates and lot more; Mutual Funds are a sure
convenient way of investing.
•
Low
Costs
Mutual funds have a pool of money that they have to
invest. So they are often involved in buying and selling
of large amounts of securities that will cost much lower
than when you invest on your own.
•
Liquidity
One of the greatest advantages of Mutual Fund investment
is liquidity. Open-ended funds provide option to redeem on
demand, which is extremely beneficial especially during
rising or falling of Markets.Transparency, Flexibility,
Choice of Schemes and Regulated: Indian Mutual fund
industry also presents several other benefits to the
investor like: transparency - as funds have to make full
disclosure of investments on a periodic basis, flexibility
in terms of need based choices, very well regulated by
SEBI with very strict compliance requirements to investor
friendly norms.
•
Tax
Benefits
Investment in mutual funds also enjoys several tax
advantages. Dividends from Mutual Funds are tax-free in
the hands of the investor (This however depends upon
changes in Finance Act). Also, capital gain accrued from
mutual funds investments for period of over one year is
treated as long term capital appreciation and is taxed at
a lower rate of 10% without benefit of indexation or 20%
with benefit of i.
