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Why to Invest in Mutual funds

ICICI Securities 17 Jun 2022
  • Mutual funds can be used for short- as well as long-term goals
  • From funding the down payment of your home loan to retirement, MFs can be used to cater to all your goals
  • MFs help you invest in various asset classes such as equity, debt and gold
  • A professional manages your money, which increases the likelihood of success
  • You don’t have to worry yourself in terms of tracking daily movement of stocks and scrips

It is true that money can’t buy happiness. But let’s be honest, more money does not exactly make us unhappy either. While it may be easy for the rich, most of us have to work really hard to make enough money to not worry about our finances in the future. The unfortunate part is that no matter how much you earn, there is always that inflation monster lurking nearby. The taxman just adds to this misery. In this scenario, how does one get ahead and become wealthy?

The easiest way out is investing in financial instruments, according to your financial goals. The most convenient way to invest in different assets is through mutual funds (MFs).

Why Should You Choose Mutual Funds?

This question may arise considering the availability of a plethora of financial products in the market. The simple answer to this question is that mutual funds are professionally managed financial products that pool money from different individuals and invest it on their behalf in various asset classes such as equity, debt or gold.

The investment decisions are handled by expert fund managers, depending on the scheme objective and market conditions. They take all the hassle and not the investor directly. MFs are attractive because they are flexible, affordable, professionally managed, give room for diversification and offer liquidity.

Different investors may have different needs and varied level of risk appetite. You may be a conservative, aggressive or a very aggressive investor based on your financial goals. MFs are tailor-made for all your investment needs. Right from parking your money for the short term to investing for long-term future goals such as retirement and children’s education, MFs offer a wide range of products from equity to liquid funds.

Here are the top three categories of mutual funds that investors can consider for various goals: Equity, Debt and Hybrid.

Equity Mutual Funds

Mutual fund schemes that invest your money into equity shares of different companies are called equity mutual funds. As an asset class, equity funds have the capability of giving you higher returns in the long run with an acceptable level of risk. If you look at the long-term performance of equity funds, say 10 or 15 years, they have delivered superior returns. Equity is a must-have asset class in your portfolio if you have long-term financial goal in mind. Equity MFs come in multiple variants, their category depending on the type of stocks invested in to build a portfolio.

Debt Mutual Funds

Debt MFs invest in debt securities such as government bonds, corporate bonds, commercial papers, and other money market instruments. There are various types of schemes in the debt fund category. These are classified on the basis of the type of instruments they invest in and their duration in the portfolio.
For instance, a long-term debt funds will invest in various types of bonds such as corporate, government and money market instruments with longer maturity.

Hybrid Mutual Funds

This category invests in a mix of asset classes such as equity, debt and, in some cases, gold. Broadly, it is further divided into three sub-sections depending on equity allocation. They are equity-oriented hybrid funds, debt-oriented hybrid funds and dynamic allocation hybrid funds. It can be used for a variety of investment functions such as asset allocation and diversification, portfolio rebalancing and the primary one of earning equity-linked returns with lower volatility than pure equity funds.

Conclusion

MFs offer solutions for all your financial needs, right from funding the down payment for your home loan to funding your sunset days. You just need to choose one that suits your financial needs.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism

Please note that Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. I-Sec does not assure that the fund's objective will be achieved. Please note. NAV of the schemes may go up or down depending upon the factors and forces affecting the securities markets. Information mentioned herein is not necessarily indicative of future results and may not necessarily provide a basis for comparison with other investments. Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

The information provided is not intended to be used by investors as the sole basis for investment decisions, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific investor.The contents herein above shall not be considered as an invitation or persuasion to trade or invest. Investors should make independent judgment with regard suitability, profitability, and fitness of any product or service offered herein above. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

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