Key reasons to consider Mutual Funds as investments

Nowadays many investors desire to have financial assets, though not as the carvings for physical assets like land and gold, there is a potential growing interest in financial assets too. This is because most investors are understanding the differences between saving and investing, the ability of different assets in generating returns, importance of professionally managed portfolio services such as mutual funds, PMS, etc.

In this article, we are trying to give further clarity on the reasons to have investments in such professionally managed financial assets. let us explore the key reasons to consider mutual fund investments.

Key Reasons to Consider Mutual Funds for Long-Term Goals

Inbuilt advantages of SIP/STP/SWP:

Unlike fixed deposits or investments in land, a mutual fund investor does not need lakhs of rupees to invest in mutual funds. An investor can start investments in mutual funds with amounts as low as Rs.500/- to Rs.1000/-.

The inclusion of SIP (Systematic Investment Plans) or using STP/SWP (Systematic Transfer Plan/Systematic Withdrawal plans) can further boost the corpus and returns of an investor’s end corpus or returns as well.

The flexibility provided to a client with different types of investment options is one of the main reasons for considering mutual funds as a tool for achieving the long-term goals of an investor.

Power of Compounding:

The ability to provide exponential growth to your investments over a period of time can be said as the power of compounding. But to unlock the complete power of compounding, staying invested for longer periods is the key.

Suppose you have invested Rs. 5.00 lakh in a hybrid fund and the return expected is 10%

after 5 years, the value of the investment would be Rs.8,05,255/-

after 10 years, the value of the investment is Rs. 12,96,871.23/-

after 15 years, the value of the investment is Rs. 20,88,624.08/-

after 20 years, the value of the investment is Rs. 33,63,749.97/-

after 25 years, the value of the investment is Rs. 54,17,352.97/-

after 30 years, the value of the investment is Rs. 87,24,701.13/-

Thus, the more you stay in the investment, the more power of compounding an investor can unlock.

Wide variety of investment options:

In the above example, the return is considered 10% because of the selection of hybrid funds, which is one category of mutual funds. There are many other such categories ranging from overnight funds to small-cap funds. Each category of mutual funds has its own risks-rewards for its investors. Thus, understanding your requirement and choosing the best category for your goals s the key. You can do it with the help of a financial advisor if needed.

The expertise of the fund managers is another key reason for investing in mutual funds.

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