While thinking of investing in the stock market, people ask why they cannot invest directly.
Very often people are told that the way to begin is through mutual funds. They should take help of professional fund managers to make investments.
Here are four main reasons for choosing a mutual fund over trading directly in the market.
Every individual might not be very savvy about investment management. Mutual Funds are handled by professional fund managers, who understand the markets. They will pick stocks for you. This is after doing an extensive research on future prospects for profits of the company
With a small investment value, asset options are limited. For example, you have Rs 5,000 and the face value of a bond you are interested in is Rs 10,000. A mutual fund will let you buy a slice of that high priced bond. You get the benefit of the interest rate offered on the bond through units of mutual funds that you hold.
MFs invest in an array of assets – equities,debt or money market instruments. So, investing in mutual funds will allow you to diversify your risk & portfolio. Moreover, a mutual fund can give you access to more assets than your corpus can buy on its own.
TRANSPARENT & WELL REGULATED
Mutual funds are well regulated and are closely supervised by the market regulator, SEBI. These investments are very transparent as NAVs are declared on a daily basis and portfolio disclosed every month. The performance is benchmarked against relevant indices.
IN A NUT-SHELL: Investing through mutual funds is the ideal way to enter the market. It provides professional fund management and diversification. Investing through mutual funds removes the hassles such as time consuming stock research and constant monitoring of stock movements.