Investing can sometimes be tough due to the large number of options available.It can become difficult for someone to choose between stocks, real estate market accounts etc.Choosing the right investments based on your requirements and goals with minimum risks involved is another task itself. No matter what you choose there is always some kind of risk associated with it and not to mention the uncertainty on ROI. As we all know when you buy stocks through a mutual fund, you need to pay an annual fee whereas if you invest directly, all you need to do is pay the one time of brokerage. Usually people prefer to invest where there’s a fixed guarantee of the capital invested as well as great return on ROI. Here are a few reasons why taking the fund route for investment is the better and safer option.
Diversification of wealth – A well diversified portfolio consists of at least, 25 – 30 stocks. However to create this a single individual may not be able to gather funds on his own or will be able to manage them all together. Also one may not have the bandwidth to handle all of this simultaneously along with their hectic job life. Another benefit of diversification is that it minimizes the risk. Through diversification you can buy stocks of various companies that do not belong to the same sector thereby diversifying your portfolio and managing the risks better. The remaining risk that you carry is the market wise risk or the minimum risk that is applicable in every investment vehicle. Investing in mutual funds means not putting all your eggs in the same basket.
Convenience – The biggest convenience that mutual funds offer is that it often comes along with a funds manager. Hence the research and the decision making is in someone else’s hand who is much more professionally suitable for the job. If not possible you can invest through an investment app such as scripbox.
Lower costs – If you buy and sell shares, you will have to pay demat charges. However for mutual funds due to their scale you will only have to pay only a fraction of the brokerage. The trading costs are spread over all the investors thereby reducing the individual costs. You can also search for funds that do not require a transaction fee and can save your costs there as well.
Overall one can say mutual funds are better and safer than most of the other investment vehicles as the risks involved are minimum and there’s plenty of guidance available for beginners. However mutual funds come with their own set of risks, so just like other things make sure you research enough and gain as much knowledge as possible.