| |
THE BENEFITS OF INVESTING
THROUGH A MUTUAL FUND |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
 |
 |
|
 |
 |
 |
|
|
|
DBS Cholamandalam Asset
Management Ltd.
27th Floor, Unit 1,
World Trade Centre, Centre 1
Cuffe Parade.
Mumbai – 400 005. |
|
 |
|
|
| |
Affordability |
| |
Mutual funds allow you to invest small sums. For instance, if you
want to buy a portfolio of blue chips of modest size, you should at
least have a few lakhs of rupees. A mutual fund gives you the same
portfolio for meager investment of Rs.1,000-5,000. A mutual fund can
do that because it collects money from many people and it has a
large corpus. |
| |
|
| |
Professional management |
|
|
|
| |
The major advantage of investing in a mutual fund is that you
get a professional money manager to manage your investments for a
small fee. You can leave the investment decisions to him and only
have to monitor the performance of the fund at regular intervals. |
|
|
|
| |
|
|
|
|
| |
Diversification |
|
|
|
| |
Considered the essential tool in risk management, mutual funds
make it possible for even small investors to diversify their
portfolio. A mutual fund can effectively diversify its portfolio
because of the large corpus. However, a small investor cannot have a
well-diversified portfolio because it calls for large investment.
For example, a modest portfolio of 10 bluechip stocks calls for a
few thousands.
|
|
|
|
| |
|
|
|
|
| |
Convenience |
|
|
|
| |
Mutual funds offer tailor-made solutions like systematic
investment plans and systematic withdrawal plans to investors, which
is very convenient to investors. Investors also do not have to worry
about investment decisions, they do not have to deal with brokerage
or depository, etc. for buying or selling of securities. Mutual
funds also offer specialized schemes like retirement plans,
children’s plans, industry specific schemes, etc. to suit personal
preference of investors. These schemes also help small investors
with asset allocation of their corpus. It also saves a lot of paper
work. |
|
|
|
| |
|
|
|
|
|
| |
Cost effectiveness |
|
|
|
|
| |
A small investor will find that the mutual fund route is a
cost-effective method (the AMC fee is normally 2.5%) and it also
saves a lot of transaction cost as mutual funds get concession from
brokerages. Also, the investor gets the service of a financial
professional for a very small fee. If he were to seek a financial
advisor's help directly, he will end up paying significantly more
for investment advice. Also, he will need to have a sizeable corpus
to offer for investment management to be eligible for an investment
adviser’s services. |
|
|
|
|
| |
|
|
|
|
|
| |
Liquidity |
|
|
|
|
| |
You can liquidate your investments within 3 to 5 working days
(mutual funds dispatch redemption cheques speedily and also offer
direct credit facility into your bank account i.e. Electronic
Clearing Services). |
|
|
|
|
| |
|
|
|
|
|
| |
Tax breaks |
|
|
|
|
| |
You do not have to pay any taxes on dividends issued by mutual
funds. You also have the advantage of capital gains taxation.
Tax-saving schemes and pension schemes give you the added advantage
of benefits under section 88. |
|
|
|
|
| |
|
|
|
|
|
| |
Transparency |
|
|
|
|
| |
Mutual funds offer daily NAVs of schemes, which help you to monitor
your investments on a regular basis. They also send quarterly
newsletters, which give details of the portfolio, performance of
schemes against various benchmarks, etc. They are also well
regulated and Sebi monitors their actions closely. |
|
|
|
|
| |
|
|
|
|
|
| |
|
|
|
|
|
