InvestmentMutual Fund

Advantages of Mutual Funds for an Investors

Mutual funds

There are lot of investment opportunities in our country and in recent times Government has also started promoting people to save and invest. But a common man finds it difficult to invest in share market as it seems to be very volatile and risky. Therefore, one better and in fact a good option for the common investor is Mutual Fund. If some one monitors the past performance of mutual fund then he realizes that Mutual Funds normally beat the inflation and give returns which are far better than Fixed deposit.

So, in today’s article I will summarize few advantages which investor can get by investing in mutual fund and it requires less time but lot of commitment to invest in it on a regular basis.

Below are the advantages of Mutual Fund for investors:

a.) Managed by Professionals: With the help of Mutual Fund, investors get the opportunity to build the wealth which is managed by professionals. These professional management invest the money in line with predefined investment objective and while investing they do adequate research.

b.) Affordable Portfolio Diversification: With the help of the Mutual Fund an investor can even invest a very small amount like Rs. 500 and it gives him enough investment portfolio diversification. With the help of this diversification, an investor ensures that all the eggs are not in the same basket and with the help of diversification it is less likely to lose money on all the investment at the same time.

c.) Economies of Scale: An individual investor with small amount to invest cannot afford to engage such professional management by them self. Therefore Mutual Funds provide that platform where they pool the large sum of money from so many investors which makes it possible for the Mutual Funds to engage professional managers to manage the investment. Mutual Fund can negotiate for better terms with brokers, bankers and service providers.

d.) Liquidity: Many a times, investor can’t find the company where they can invest the money and they are stuck with the cash in their wallet, in contrast to this investors may be found in a situation where they have securities but there is no buyer in the market for the same. Instead of this, Mutual Fund offers different sort of schemes so that the investor is able to select one as per his liquidity’s requirement. Hence, Investors in Mutual Fund schemes get a lot of liquidity and flexibility to recover the value of money invested from Mutual Fund itself.

e.) Tax Deferral: In the share market if an investor directly earns profit on his security; TAX may have to be paid in the same financial year (if you book the profit in less than 1 year then you have to pay 15% tax on the profit in the same financial year). Instead, Mutual Funds are not liable to pay tax on the income earned so they can transact many a times in a financial year. So, Mutual Fund helps investor build their wealth faster than would have been the case, if they were to pay tax on the income each year.

f.) Tax Benefits: With the help of Equity Linked Savings Schemes (ELSS), an investor can invest in such schemes and can save tax under Section 80 C. This kind of scheme offer very good return as compared to any other tax saving option available.

g.) Convenience Options: Mutual Fund offers great transaction convenience like the ability to withdraw only part of the money from the investment account, ability to re-invest additional amount to the account, setting up systematic transactions, etc.

h.) Systematic Approach to Investment: Mutual Funds also offer facilities that help investors invest amount regularly through Systematic Investment Plan (SIP) or withdraw amount regularly through Systematic Withdrawal Plan (SWP) or move money between different kinds of schemes through a Systematic Transfer Plan (STP).

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Happy Investing!!

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.


  • ParamjotSingh1 Yes, According to me it does matter. In my perspective both the things be it shares or mutual funds; lie at the same level. So, If you are purchasing the mutual fund
    when market is high; it may effect your future return just as in case of shares. So, Normally
    we should try to buy the mutual fund when market is down as we do in case of shares as well.

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