Low Cost
An important advantage of mutual funds is their low cost. Due to huge
economies of scale, mutual funds schemes have a low expense ratio. Expense ratio
represents the annual fund operating expenses of a scheme, expressed as a percentage of
the fund’s daily net assets. The limits of expense ratio for various types of schemes has
been specified under Regulation 52 of SEBI Mutual Fund Regulations, 1996.
Liquidity
You can easily redeem (liquidate) units of open ended mutual fund
schemes to meet your financial needs on any business day (when the stock markets and/or
banks are open), so you have easy access to your money. Upon redemption, the redemption
amount is credited in your bank account within one day to 3-4 days, depending upon the
type of scheme e.g., in respect of Liquid Funds and Overnight Funds, the redemption amount
is paid out the next business day.
Well-Regulated
Mutual Funds are regulated by the capital markets regulator, Securities
and Exchange Board of India (SEBI) under SEBI (Mutual Funds) Regulations, 1996. SEBI has
laid down stringent rules and regulations keeping investor protection, transparency with
appropriate risk mitigation framework and fair valuation principles.
Tax Benefits
Investment in ELSS upto ₹1,50,000 qualifies for tax benefit under
section 80C of the Income Tax Act, 1961. Mutual Fund investments when held for a longer
term are tax efficient.
Professional Management
A mutual fund is managed by full-time, professional money managers who
have the expertise, experience and resources to actively buy, sell, and monitor
investments. A fund manager continuously monitors investments and rebalances the portfolio
accordingly to meet the scheme’s objectives.
Risk Diversification
Buying shares in a mutual fund is an easy way to diversify your
investments across many securities and asset categories such as equity, debt and gold,
which helps in spreading the risk - so you won't have all your eggs in one basket. Thus,
risk diversification is one of the most prominent advantages of investing in mutual funds
Liquidity
You can easily redeem (liquidate) units of open ended mutual fund
schemes to meet your financial needs on any business day (when the stock markets and/or
banks are open), so you have easy access to your money. Upon redemption, the redemption
amount is credited in your bank account within one day to 3-4 days, depending upon the
type of scheme e.g., in respect of Liquid Funds and Overnight Funds, the redemption amount
is paid out the next business day.