Importance / Benefits of Mutual Funds

Mobilizing Small Savings

Funds are mobilized by way of selling units. A unit is a proportional share of securities in the portfolio of a mutual fund. Small fund investors get benefits of portfolio investment with the small amount of their savings.

Investment Avenue

Mobilized funds are invested in various types of investment avenues. Investment avenues are Shares and Bonds of various Companies and Industries, Gold, Deposits, Govt. bonds, Money Market Instruments etc., Investors can get opportunity on the portfolio of assets proportionately. Individual investors may not invest in all these investment avenues.

Professional Management

‘Mutual Funds’ utilizes professional experts and the experts manage the investment portfolios efficiently and profitably. Investors are free from taking risk of buying and selling shares.

Diversified Investment

Small investors can enjoy the benefit of portfolio investment through mutual funds. Mutual funds have the advantage of diversified investment in various industry segments.

Liquidity

Mutual fund investors can buy and sell their units in the secondary market in case of close - ended mutual funds. In case of open-ended mutual funds, the investors can withdraw holdings any time at the Net Asset Value.

Less Risk

Mutual fund investment involves very less risk. Because, the fund is managed with the professional expertise, portfolio investment, diversification and the economies of scale in transaction cost.

Legal Protection

Securities Exchange Board of India (SEBI) is the regulatory body of securities market in India; it provides the regulations and guidelines for Mutual funds.

Tax Benefits

Under the provisions of Income Tax Act, the investors of mutual fund can get tax shelter on the their investment in Mutual fund.

Minimum Transaction Costs

The transaction cost of buying and selling of mutual fund units is very less. This facilitates the investors to switch over from one scheme to another and they get benefit of flexible investment opportunities.

Economic Development

Mobilization of savings leads to investment. Mutual fund money is utilized for the investment in various industrial sectors. Industrial sector development leads to enhance the countries’ economy.