Planning to create a corpus for your retirement, or saving for your child’s higher education, or perhaps even dreaming of a world tour with your significant other? Arranging the funds to attain these goals can take a toll on you. However, one might consider investing in various assets to build wealth over time.
Investing can be overwhelming and quite complicated at times. With a plethora of options available to an individual, from stocks to bonds to money market instruments and real estate, an investor can never fall short of choices. Whatever you choose, there’s never a 100% guarantee of zero risk and remarkable positive returns.
As an investor, you must be wary of the risks associated with mutual fund investments. If you know the ABCs of investments, you must be aware that the risk-reward ratio for equity funds against any other investment vehicle is heavily in favour of equities. The illusion of ‘risk-free’ investments shatters like broken glasswhen you realise that what is perceived as freedom from risk is actually freedom to become poor.
Now that you are clear about the basics like what investment avenues should you consider for long-term investments, here comes the difficult part – equity vs mutual funds? For people recently exposed to the investing world, it’s challenging to understand where to start. Before we answer that, let us understand‘what is a mutual fund’?
Mutual funds pool the money of several investors and invest in a portfolio of various investment securities like money market instruments, debt funds, equity mutual funds, etc.
There are two distinct ways of investing in equities. You can either invest on your own through a mutual fund transfer agency like CAMS or invest in mutual funds with the help of a mutual fund manager.However, the two activities are widely distinctive from each other.
Unless you are a mutual fund expert or are willing to spend considerable time and effort to conduct due market research, the former does not make sense. There are a lot of benefits of mutual funds that direct investments do not provide. Of course, an individual can carry equity investments on his own as well.
In fact, there are a lot of individuals who manage to invest on their own with considerable success. However, the odds are very slim – just 5 to 10 people out of 100, which is not very promising.
On the other hand, a mutual fund manager considers your investment goals, investment horizon, and risk appetite before deciding on the types of mutual funds for your portfolio. There are a lot of advantages to investing in equities through mutual funds. One of the major ones is disciplined diversification. This ensures that the portfolio stays diversified and is safeguarded from any events that might affect individual stocks, sectors, or types of stocks.
Further, when you invest in mutual funds online, you can begin investing with a small amount too.Additionally, mutual funds fetch higher returns in the long run. All in all, there are a lot of mutual funds benefits, making them an ideal investment tool for investors.
