Advantages of Mutual Funds
Professional Management
The basic advantage of funds is that, they are professional managed, by well qualified professionally. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments.
Diversification
Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others.
Simplicity
Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.500 per month basis.
Economies Of Scale
Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to bring down the average cost of the unit for their investors.
Liquidity
Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want.
Transparency
Transparency is the extent to which investors have ready access to required financial information about a company such as price levels, market depth and audited financial reports.