Mutual funds offer a wide range of mutual fund schemes to the investors, which can be chosen as per the investment objectives and financial goals. While an investor with long-term goals may choose equity funds, an investor looking to maintain an emergency fund can invest in liquid and overnight funds. Similarly, there are different fund categories suiting different financial goals and investment horizons.

This is another key benefit of investing in mutual funds as one can avail professional fund management for the money invested. Professional fund managers take the investment decisions in a mutual fund scheme with a team of research analysts backing the investment hypothesis.

Mutual funds offer an affordable investment alternative, as the investments in most of the mutual fund scheme can be made with an amount as low as Rs. 500 depending upon the scheme and AMC. Further, the fund management charges for managing the funds could be also lower, with the maximum ceiling also regulated by the Securities & Exchange Board of India (SEBI).

One can avail of different facilities in mutual fund investing like Systematic Investment Plans (SIPs), Systematic Withdrawal Plans (SWPs), Systematic Transfer Plans (STPs), etc. Such investment options aim towards different objectives and allow the mutual fund transactions to be made automatically at specified intervals. Such automation helps eliminate the emotional bias from the investment decisions and let the investors focus on the portfolio review instead of focusing on timing the investments.

One can undertake redemption transactions in mutual fund schemes without any restrictions, except for specified schemes like close-ended funds and Equity Linked Savings Schemes (ELSS). As such, the investments continue to remain liquid and available for any financial contingency. Further, the liquidity is ensured through the mutual fund house itself, as the investor need not worry about a contra order matching. This contrasts with equity transactions wherein the order for equity shares on stock exchanges also needs an opposite trade at the same price for the order to be executed.

It is always advised, “one should not keep all the eggs in the same basket.” As such, it is always to stay diversified in the investment strategy. Mutual funds lend an automatic diversification to the investment portfolio, as a basket of shares and securities is created while building a scheme portfolio. Further, investors can also choose to invest in hybrid funds, which allow the investors to invest in two or more asset classes with a single investment.

Once an investor has registered a Systematic Investment Plan (SIP), a sense of discipline and regular savings are inculcated through periodic investments in the specified mutual fund scheme without manual action during each installment. This allows the investments to make investments in mutual funds across market ups and downs and average the cost of investments over time. If one needs to make an investment decision at each SIP installment, any market uptrend may defer the investments to make investments better and lower valuations. Further, regular investments ensure the steady accumulation and growth of the investment corpus in the pursuance of financial goals.

Mutual fund industry is regulated by the Securities & Exchange Board of India (SEBI) and guided by several SEBI Regulations on different aspects. Such regulations ensure transparency in the functioning of mutual funds and aim towards protecting the investors’ interests. Some of such regulations are prescribing an upper ceiling on Total Expense Ratio (TER), disclosing NAV (Net Asset Value) on each working day, disclosing investment portfolios on a monthly/ fortnightly basis, and comparative returns the benchmark index as against the scheme performance, etc. The mandatory implementation of such disclosures helps enhance the transparency of the mutual fund schemes.