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An important person in every family does the financial planning of the entire family. The future of every family depends on the decisions taken by that person, who works hard to earn money. In such a situation, it is important to have financial literacy and planning skills. As you may know, many people in India have turned to investing in mutual funds for the last few decades. The reason behind everyone's focus on mutual funds is the returns given by various funds!

People who have been investing in mutual funds for the past few years. They have earned financial wealth today. Their decision-making ability and their discipline are also equally important in this. Many people invest in various options and invest in mutual funds. But they don’t do proper financial planning. In today's blog, we are going to get detailed information about how important mutual funds are for financial planning.
 

1. Diversification:

Mutual funds are an investment vehicle that offers a wide range of investment options. Rather than increasing the risk by investing in a single instrument, investing in a variety of assets is a sign of good financial planning.
 

2. Fund Manager:

A fund manager is a person with financial expertise in this field who is appointed by an asset management company. The fund manager makes all investment decisions. Fund managers play an important role for people who are unable to make financial decisions or manage their money.
 

3. Accessibility and Affordability:

In today's digital age, everything has become online. Mutual fund companies provide the facility of investing in mutual funds through a Demat Account, Bank Account and Fund Distributor. Also, facilities like SIP are available to invest in mutual funds. Through SIP, you can invest weekly, monthly, or every three months. Through SIP, you can start investing from as little as Rs 100. This method introduces investment discipline to the investors.
 

4. Investing with a goal:

There are many types of mutual funds. Each fund has a different goal and objective. There are types of mutual funds based on various aspects such as short-term, long-term, children's education, retirement, etc. No other investment instrument has such a beautiful system. If you are investing in mutual funds with a goal in mind, then you are doing your financial planning in the right way. If, perhaps, you find all these things complicated, then take proper guidance from a mutual fund advisor!
 

5. Tax exemption or tax efficiency:

As you know, various fees and taxes are charged on every investment or trading in the stock market. Since mutual funds are also an investment option, they also attract taxes like STGT and LTGT. But especially in mutual funds, mutual funds like ELSS are given tax relief up to Rs. 1.50 lakh under Section 80 C of the Income Tax Act 1961.

6. Transparency and Regulation:

We are the first to see banks fail many times. When a bank fails, all the account holders are affected. Such incidents mainly happen due to a lack of transparency and violation of rules. Therefore, while making any investment, it is important to have transparency and rules in that system. All mutual fund companies in India operate under the rules of SEBI and AMFI. Due to this, this system has been running well for many years.

Overall performance of FDs and mutual funds in banks in the last 20 years:

The average interest rate on FDs in India is 5 to 7%. If a person invests in FD, it may take 8 to 10 years for his amount to double. On the contrary, if we consider the last 20 years of Mutual Funds, if we consider the last 20 years, then annual returns of up to 15% to 30% have been given. It may take 5 to 6 years for the amount invested in this to double.

Mutual Funds are affected by various factors such as market developments, government decisions, geographical events and trade relations. Due to this the returns in Mutual Funds can also decrease or increase! 

Conclusion:

Diversification and skilled guidance from fund managers are available in Mutual Funds making Mutual Funds special. Its main advantage is risk reduction, which helps in good financial management. No other investment instrument provides this kind of diversity, so make sure to include Mutual Fund investments while making any investment!

Keep learning, keep Investing!

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