9 Reasons to start a Mutual Fund
What is a Mutual Fund?
Mutual fund pools in money from people and companies and then collectively invest it in the stock market. The money is invested in various investment options as per their guidelines. There can be different options like stocks, bonds, other assets in different industry sectors. In Mutual Funds, you tend to have “units” rather than shares. The cost of each unit actually reflects the market price of the fund holdings, adjusted according to the management fees and their expenses.
For mariners, this is the best option to invest in the market and have a good equity exposure. Being at sea for long stretches means that we would be unable to pay attention to the market variations and adjust our stock holdings accordingly. Timely investing in mutual funds would ensure that this does not happen. We lack the technical expertise to know where to invest and how much to invest. The fund manager of the respective fund would take care of these things, in return for a small fee
Below I have mentioned few benefits of Mutual funds:
The fund happens to invest in many different companies based on their analysis. Irrespective of you investing 500 or 50,000INR, your money is never invested in a single entity, meaning you are provided with the immediate benefit of instant diversification and asset allocation without the large amounts of cash needed to create individual portfolios.
The main problem is that people have fewer funds to invest at one go, 1000- 2000 INR is usually not enough to buy a quality stock in a sizable quantity. After figuring in the commissions of the fund houses, the amount goes down further. When one invests in a mutual fund, the minimum investment is as low as 500INR. This opened up the market to a large extent because now a large segment of the general public who earlier could not enter the equity market, could now easily do so. If one starts an SIP (Systematic Investment Plan) on a monthly basis, we as mariners can ensure that even when we are sailing, we are simultaneously investing in the market as well.
The Large Scale Factor:
If you have to personally diversify your portfolio across say 20 stocks then you would end up paying a lot more on commissions. This would result in a lesser profit margin for you in the long run. When you invest in a mutual fund, they are able to diversify your money to a much wider array of stocks without the associated charges !! Say if the stock market varies in the favor of a particular stock and you need to re-adjust your portfolio, you would end up paying a lot of transaction fee. Plus, the lack of a good internet connection and time, while sailing it is a very bad idea to try and manage your own portfolio.
Mariners are either engineers or navigation officers, both lack the knowledge of finance market. Even after knowing that, it would be stupid to manage your own investment needs. Getting help from people who know what they are doing is not a bad thing. When you start an SIP, you essentially do that. Your money is managed by an individual called a “Fund Manager” who has the necessary skill and experience in the market.
According to recent RBI guidelines, the Exit load for MFs has been removed. This simply means that you can exit a mutual fund by selling off the units and get back the money, anytime you want. Some banks also offer a loan against your units of a mutual fund.
Market Dips are Good !!
If say the market goes down, then the NAV or the Net Asset Value of the fund would also go down. This works in the customer’s favor who has set up an SIP. The same amount of money would be able to buy MORE units, so indirectly you are getting more for less. So it’s favorable for the customer in the long run.
Tip: If you are tracking the market, try and buy A-listers during a bearish run of the market. Look for share splits and buy in bulk.
Easy to Invest:
If you wish to invest in Mutual fund, all you have to do is go online to your depository account and select the fund which you wish to apply for, set up the instruction and that’s it !!
Discipline in Investing:
Since you automate the investing process via SIP, you ensure that you are investing regularly. This is the most important factor for any individual because a regular investment would reduce your burden and it will generate a steady financial growth.
Tip: You can start an SIP with your Depository to automate your investment.
Easy tab keeping:
Keeping a check on your investment is a lot easier, all you have to do is go to your online profile and check the progress of your fund as compared to the market.
Tip: You can make a free profile on money control and use their services for tracking the growth of your portfolio.