Mutual funds demystified: Understand the pros and cons



Mutual funds are thought to be the most well-liked type of investment. Most investors use mutual funds to diversify their holdings and increase returns.

Pros:

Professional portfolio management- A person's portfolio is maintained by skilled business specialists with in-depth knowledge of the industry. They help you decide whether you should invest in an equity fund, debt fund, or anything else. 

Diversification- Securities from various asset types, including bonds, commodities, and cash, can be purchased through mutual funds. This aids the diversification of a portfolio.

Affordable- Investing in mutual funds is incredibly cost-effective since an individual can contribute as little as Rs. 500 monthly using the SIP option. Please note that usage of a SIP calculator online is needed to understand the SIP plan better. 

Cons:

Lock-in clause- Mutual fund schemes come in two varieties. One has an open-ended lock-in duration of three to five years, allowing you to enter and depart anytime. The other has a closed-ended lock-in period. Investors must pay an exit load if they want to redeem their investment before the lock-in term.

Read also: Mutual Fund Schemes vs. Stocks: Which is the Better Investment Option?

 

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