Thursday, December 14

Importance of Mutual Funds

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Benefit

  1. A mutual fund reduces an investor’s risk two ways: through diversification in companies and diversification in business fields. By purchasing a combination of stocks, bonds and other securities–rather than just one single stock purchase–their risk is spread out over many fields and companies, instead of just one.

Experienced Management

  1. Purchasing into a mutual fund automatically provides the investor with an experienced investment manager to oversee their investment. This is because the mutual fund is composed of different investment securities and requires a competent professional to oversee it from the onset.

Types

  1. There are no-load mutual funds, mutual fund loads and closed-end funds. No-load mutual funds don’t cost the investor a sales or commission fee. Mutual fund loads do have a fee. And closed-end funds can have sales fees and management fees.

Types of Mutual Fund Loads

  1. Mutual fund loads, as a category, are further broken down into four types: Front-end loads, back-end loads, purchase fees and redemption fees. All four incur fees but at different times during the investment transaction. Front-end loads and purchase fees require fee payment at the beginning of the transaction/purchase. Back-end loads and redemption fees are part of the sale process.

Fees

  1. Paying a significant transaction fee at the time of purchase of a mutual fund causes the investor to start off with a “loss” in his investment. No-load mutual funds do not have this upfront fee, however.

Features:

Unlike most other financial products like provident fund, insurance and post office schemes, Top Mutual Funds not only provides convenience while investing money, but it also offers a variety of features that benefit investors. A few of most common features and benefits of  top mutual funds are highlighted.

Micro SIP/Chota SIP:-

Invest as low as Rs 100/- in Mutual Fund Companies

Top Mutual Fund Companies offer its investors an option to invest extremely small amounts such as Rs 100/-, Rs 500/-, Rs 1000/- each month depending on individual’s capacity into many of its mutual fund schemes.

Flexibility of Dates:-

Ease of investing on convenient dates

Investor can invest in top Mutual Fund Scheme on their choice of dates. Many large Mutual Fund companies offer multiple dates for investing into its top performing mutual fund schemes. E.g. few dates would be 1st, 5th, 10th, 15th, and 25th of each month. This makes regular investments on salary dates possible.

Timely Payments through ECS:-

Hassle free, Regular Payments to allow you to concentrate on other important things in life

Investors in Mutual Funds need not worry about making timely payments each month through opting for ECS Payment Method. This ensures regular, hassle free, timely and correct monthly payments.

Investing Through POA (Power of Attorney):-

Investing without physical presence

Investments in Mutual Funds can be done through Assignment of a Power of Attorney for effective financial planning. Army Personnel, Officers posted on-duty at far off places, owners/directors of limited companies, Non-Resident Indians, Resident Indian posted onsite/outside India can invest through the convenience of POA.

Top-up Facility for Mutual Funds:-

Happy with your fund performance, increase your payment amount

Apart from regular payments investors can also invest via top-up facility. The amount of SIP can be increased at fixed intervals. The Top-up amount has to be in multiples of Rs 500/- depending upon fund. The frequency is fixed at Yearly and Half-Yearly Basis.

Direct Credit of Dividend Payments:-

No need to rush to bank to deposit the Dividend Cheque

Asset Management Companies offer direct credit of dividend payment proceeds to investor’s bank accounts in order to ensure faster processing and timely credits of dividend amount.

Direct Credit of Redemption Payments:-

Get back your money quicker when you sell mutual fund units

When a mutual fund is sold the money is directly credited to investor’s bank account to facilitate quick withdrawal of funds

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