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Nowadays, due to ease of digitalization investing in mutual fund is one of the easiest way to invest in stock market and bonds to make good returns from markets for longer term. Like any other investments mutual funds also doesn’t guarantee the future performance but from the past performance it is proven that many mutual funds has beaten the returns on investment when compared to other form of investments.

If you are  one who is looking short term returns like one or two years then you may not be satisfied with return on investment. But if you are looking for long term investment for a period of more than 3 years with minimal risk you will more happier than other investors who has invested in other financial instruments.

FOLLOWING ARE TOP 5 REASONS WHY ONE SHOULD CHOOSE AND START SIP IN MUTUAL FUNDS.

1) DIVERSIFICATION.

Investment in multiple stocks –  When you select a mutual fund for example –  HDFC midcap opportunity fund, then this fund invests in multiple top performing mid cap companies. This puts your fund in diversification instead of depending on single company performance for best returns.By diversifying your investments, the Mutual Fund has spread out your money so you don’t put all your eggs in one basket. Instead, it is invested across different asset classes and industry sectors. A well-diversified portfolio has lower volatility (ups and downs) and grows steadily over time.

2) LOWER COSTS.

Most of us don’t have the resources or the time to do analysis or in some cases we don’t carry experience to buy tens of individual stocks. Buying stocks and bonds yourself will likely cost you more, require constant monitoring and take up a considerable amount of your time. Because they manage large amounts of money on behalf of millions of individual investors, mutual funds are able to take advantage of their buying and selling size and thereby reduce transaction costs with minor fees.

3) LOW MINIMUM INVESTMENT.

Many investors don’t have the exact sums of money to buy even individual shares in the Nifty. But you can start SIP with minimum investment of Rs 500 through Mutual funds. Once you register your bank mandate with an investment advisor or mutual fund company, they can pull the money directly from your bank account and invest it on your behalf. A good online investment ensures that the money moves directly from your bank account to the Mutual Fund Company.

4) PROFESSIONAL FUND MANAGEMENT.

Mutual fund managers and analysts do researches, analyzes and study current and potential holdings for their mutual fund and keep reshuffling ad and when required to help you meet your goals. The stocks and bonds that a Mutual Fund invests in are publicly available every month, so if needed, you can see what your fund manager is doing. A Mutual fund makes all stock holding information in the form of a fact sheet on their website.

5. Liquidity

Because your money is spread across so many stocks and bonds, you can sell your mutual fund holdings at any time to meet your financial needs. The money hits your bank account as soon as the day after you sell the mutual fund.

A mutual fund can offer a simple and efficient way to invest for your life goals – whether retirement, education, buying a home, or just generally making sure your money grows. And a good investment advisor can help you achieve these goals – at a price that is honest and fair.

If you’re planning to invest in tax saving fund then the lock in period is minimum 3 years.