Advantages of investing in a well-managed mutual fund
There are several advantages of putting your money in a well-managed mutual fund. You will ensure an appreciation in capital as mutual funds will usually outperform the broader markets. But how is this made possible?
- Professional expertise: Experienced fund managers in top mutual funds are thorough professionals. They track the markets, literally on a minute to minute basis and from a longer perspective as well.
- Timely investment decisions: Backed by their professional expertise and market knowledge, fund managers are in a better position than an uninformed investor to understand the markets and take timely investment decisions.
- Achieving diversification and reduced risk: A mutual fund scheme spreads its investments across a number of select stocks or debentures. As a result, the risk factor is greatly reduced. Just to elaborate, even if the prices of a few stocks go down, other companies in the MF portfolio that record a rise balance it out. The latter can well compensate for these fallen stocks. Thus, no substantial loss is caused to the investor.
- Less inexpensive: Compared to direct investments in the market, mutual funds tend to cost less. This is owing to significant savings in brokerage costs, depository costs, demat costs, etc.
