Alok Kumar Agarwal Alankit talks about the benefits of long-term investments in mutual funds.
Investment in equities can seem a bit intimidating with all the financial jargon and big numbers. Many people are scared of investing in equities as they do not understand the market or have the information to assess the market. However, with current inflation numbers, traditional methods of investment like FDs, Bonds etc. do not seem to be giving the desired result. This is where mutual funds come in.
Mutual funds are a popular investment option for individuals looking to invest in the stock market without having to pick individual stocks themselves. A mutual fund is simply a type of investment vehicle that collects funds from numerous individual investors in order to buy a diverse portfolio of securities, including stocks, bonds, and other assets. These funds are managed by professional portfolio managers who are responsible for making investment decisions on behalf of the investors.
According to a recent report by the Association of Mutual Funds in India, the Average Assets Under Management (AAUM) of the Indian Mutual Fund Industry stood at 40,04,638 crores in March 2023. This shows how popular equity investments have become in recent times, especially post-Covid.
There are multiple advantages of Mutual Funds investment. Firstly, they offer diversification. Diversification is the process of spreading your investments across multiple assets to reduce risk. By investing in a Mutual Fund, you are investing in a portfolio of stocks or bonds, which spreads your investment across multiple companies. This can reduce your risk compared to investing in individual stocks or bonds.
“Investing in a Mutual Fund via a SIP is the best method for new investors, and they can start by buying an index fund to be on the safer side as the volatility is comparatively lower. However, one must be ready to face the market’s volatility when investing in equities. Therefore, I suggest a long-term investment to ensure that you get the benefit of compounding,” shares Alok Kumar Agarwal Alankit.
Mutual funds are relatively easy to invest in, and most of them can be purchased through a brokerage account or directly from the Mutual Fund company. Today there are so many apps that ease the process of investing, making Mutual Funds an accessible investment option for individuals new to investing.
Another advantage is that Mutual Funds provide liquidity. The ease with which an investment can be converted into cash is referred to as liquidity. Furthermore, most mutual funds can be purchased and traded on any business day, making them a liquid investment alternative.
Alankit's Alok Kumar Agarwal says, "Investing in individual stocks necessitates extensive research; many new investors are drawn in by the promise of high returns in a short period of time, only to be disappointed when they choose the wrong stocks or enter the market at the wrong time, resulting in a loss of money." Long-term, mutual funds lessen these risks,"
There are various Mutual Funds available to investors. “The most common types include Equity funds, Bond Funds, ELSS, Balanced funds, Index funds, sectoral funds etc. one can invest according to their needs and goals.”, shares Alok Kumar Agarwal. Investments can be done for as low as Rs.100 which makes it suitable for every kind of investor!
It is important that new investors understand that despite the numerous benefits of investing in mutual funds, one cannot deny the risk. Therefore, due diligence must be done personally before buying any fund. With disciplined investment and long time horizon, mutual funds can definitely help in creating wealth.
