Advantages & Disadvantages of Mutual Funds in India (Pros and Cons)

Mutual Funds are undoubtedly the best way to invest the money. The MF provides the investor a great way to invest either small or a large amount of money according to their strength and interest towards the mutual funds. In all, it is a great option for those investors who are willing to spend their money to a place that has great liquidity features and provides them with a great variety of investments to choose for, according to their needs. However, knowing only about the pros of investing the mutual funds won’t be the most intelligent decision. And if you are planning to invest your money in a more strategic way, then it is essential that you know both the pros and cons associated with the MF investments. The mutual funds are great, but as they come under the market regulations, it becomes very important that you carefully examine both goods and bads of the mutual funds before making the investment.

This article talks about the most valid pros and cons associated with the mutual funds, and if you were planning to invest your money the MF, but are unable to decide whether you should actually do it or not, then this article will be very helpful to clear the things up in your mind.

Go through the article for the pros and the cons, or more accurately the advantages and disadvantages of the investing money to the mutual funds in India.

Advantages & Disadvantages of Mutual Funds

Pros/Advantages of investing money in the mutual funds

  • Professional Portfolio management

The best thing about investing money to the mutual funds is the get the professional management of the money. The mutual funds professional carefully examines every possible way the particular corporation or asset will behave in the current market scenario. The fund managers are qualified enough to deal with every adverse situation and they can easily work on your portfolio to make it a better and more profitable way to invest the money.

So, if you were looking for a more professional way to invest your money, then invest in some mutual funds to get the professional help from the industry experts.

  • Numerous types of Mutual funds allow the investor to carefully plan their investment

Another great thing about investing money in the mutual funds is the various options that can choose from. There are numerous types of mutual funds in India, that an investor can choose according to his strength and willingness to invest. Additionally, you can also choose the long term or short term  mutual funds to get the maximum benefits from the mutual funds.

This wide range of funds makes it easier for a new investor to choose a perfect fund to start their investment. The only thing that you need to do, is to contact a mutual fund expert and discuss about the best funds for you according to your needs and preferences.

  • Investing in mutual funds doesn’t need a big amount

The mutual funds do not ask you for a big investment. You can easily start your investment by investing INR 500 per month to get used to it and if you find it suitable for you, then you can easily increase your amount of investment. So, if you were looking for a better investment that does not require a large amount at once, you should consider the mutual funds for yourself.

This makes it a great option to invest money for those users who have recently started earning and do not have enough budget to invest a lump-sum amount in one place.
So, choose the best mutual fund according to your portfolio and start investing today.

  • Liquidity

Another major advantage of investing in the mutual funds is the liquidity. You can easily withdraw your money just by contact your broker or MF agent, and if you will have the money in a day or two for max. This facility is hardly provided by other means of investment, and this makes the mutual funds a great way to invest money without worrying about the formalities that you need to follow your own money.

  • Tax deductions

There are numerous funds that provide you the facility of tax deduction. You can invest in the mF for a period of one- year  or more to gain the tax deduction in capital gains. So, if you were looking for some tax relaxation, then too, the Mutual funds can be very beneficial for you.

Read Also: What is STP in Mutual Fund? How does it Work?

Cons/Disadvantages of investing money in the mutual funds

  • You can’t be assured of getting higher returns

Although there are numerous pros and advantages of mutual funds, but as they operate under the market regulations, you can’t be always assured of getting great returns. Although it doesn’t mean that you will always get lower ROI, but still you can’t be sure of getting the returns according to your expectations.

  • Fund management fees

No matter which fund you are investing in, and how it is performing, you will need to pay the annual charge known as the expense ratio as an investor. Also, the fund management fees (roughly 0.5-3%) is charged from the investor.

  • Lock-in period

Almost all mutual funds have a clause called as the “Lock-In period” that specifies the minimum period that you must keep your money invested to the fund. Although you can withdraw the money prior to this period but if you do so, you will need to pay them extra amount known as exit load.

Read Also: What is NAV in Mutual Fund? How it Affect your Investments?

So, make sure that you ask your agent about any such clause before making the investment.

So, these were the advantages and disadvantages of investing money in Mutual funds that you must be aware of before investing your money to them.

So, if you are still convinced that the Mutual funds are great for your needs, then find a perfect mutual fund and make the investment right through. On the other hand, if you think that mutual funds are not your cup of tea, then there are numerous other ways that you can opt for to get the better returns for your invested amount.

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