Features, Advantages & Benefits of Mutual Funds

Mutual Fund is not a new name anymore. In India first MF was launched in 1964 and from 1994 private players also entered to serve the investors. However, it gained more popularity from 2010 when the "Mutual Funds Sahi Hai" campaign run by AMFI & AMC.

Although MF provides a lot many features, advantages & benefits (FAB) to their unitholders, some of them are mentioned hereunder:

Feature:

• Start with a small amount
• Different ways of investments - Lumpsum, SIP & STP
• Different ways of withdrawal - Lumpsum, SWP
• It provides market link return and not guaranteed or fixed return
• Different ways & style of investing
• Choice of receiving a regular income, dividend, or capital appreciation
• Choice of Schemes & investment varieties
• No TDS under growth option for a resident investor
• Automated payment system
• Minimum paperwork / 100% online investing option

                                            

Advantage:

• Professional Management
• Portfolio Diversification
• Asset Allocation
• Risk management
• Investment comfort - convenient, simple & quick to invest 
• High Return Potential
• Low Management Cost - economy of scale
• Liquidity
• Transparency - daily NAV & monthly portfolio disclosure
• Flexibility to switch from one scheme to other
• Dynamic compares to other instruments like FD, Bonds, NCD,  PO, etc.
• Tax benefits & Tax deferal
• Well Regulated by SEBI & AMFI

Benefit:

• Affordability - invest in smaller denomination
• Power of compounding
• Rupee cost averaging in case of SIP & STP
• Cultivate a habit of savings
• Provide option from saving to investing
• Lower taxation than FD
• Wealth creator tool 
• Can fulfill & suit any of your goals
• Safety - in the sense that MF company will not run away with your invested money

                                                      

Benefit in comparison to direct equity:

• No need to acquire technical or fundamental skills 
• Full-time monitoring not required
• Deep knowledge & knowhow about the market not required
• It is not a time-consuming & fulltime activity like equity
• No need to time the market
• No worries about profit-booking
• No worries when & which script to buy & sell
• Portfolio churning my fund manager is not taxed

Disclaimer: Investment in securities & mutual funds are subject to Market Risk