When you invest there are two possibilities either you become rich or lose money. But when you have money you want to invest it at the right place that can bring you good returns on investment. As an individual, when you do not have the knowledge that how you can invest your hard earned money you need professional expertise, considerable research and a long term investment vision. There are many investment opportunities out there. In those many there are two very potential opportunities related to equity. One is Share trading & another one is Mutual funds.
Now, let’s see the 5 reasons to invest in Mutual Funds
Picking and Tracking Stocks by Professionals
When you invest in the mutual fund, rest everything is done by fund experts. They pick stocks, track them and also do asset allocation for you. When you invest in direct shares you do not know about the good stocks and can invest in defunct stock but when you invest in mutual funds, a professional fund manager provides you good stocks with long-term returns.
No Need to Pay Tax
In direct shares, you manage your own portfolio and also do buying and selling. You have to pay taxes on short term gains, but when you invest in mutual funds there is no tax on the capital you gained after selling stocks. So you can avoid tax on short term gains and this will benefits you as an investor.
Lower Investment Cost
In direct share trading, brokerages are charged to the individual when you buy or sell shares and you also have to pay demat charges. But when you invest in a mutual fund only fraction of brokerage charged to you and no need of any demat account.
Also read – 5 Investment lessons by Warren Buffett
Mutual funds help you in the diversified portfolio that you might not get as an individual. With this, you get diversification benefit without investing the large amount.
When you invest in direct shares you carry more risk than a mutual fund and this risk is called unsystematic risk. This risk can be diversified in Mutual funds.