Reason, Objective, And Goals are just synonyms of your existence in life. There is always a reason behind hustling, either to reach somewhere, to get something, and so on. The life you are living in the present day, where you wake up every morning, get ready for your office, and work hard; all of this just to reach your future goals.
So, any future plans? What are you up to? A house, a car, or something else to make your upcoming days prosperous. Well, I am pretty sure that you are saving your money for all such goals but here is a tip for you, Investing is a better option. And considering Mutual Funds is like a cherry on the cake. This article will help you understand why mutual funds are a big deal these days for your successful financial future.
‘Mutual Funds’ Meaning: Breaking The Myth Of Complexity
While we talk about mutual funds, people misinterpret the concept of mutual funds and perceive it as a complex topic. But trust me! It is quite simple to understand and interesting to invest in.
Let us all imagine a scenario where you went on an outing with your friends. In this situation, you and your friends will make a joint effort to make this plan work out by contributing in some or the other way. Maybe you will prepare snacks for everyone, someone will get the drinks, or the vehicle like can be anything to help in a successful trip that everybody will enjoy.
But it might be a hefty deal if you want your own drink, a platter of food, and your own vehicle on the trip. Mutual Funds are like such contributions to the trip where you invest or contribute your money to a pool along with other investors. And here’s the best part! Just like the trip, everyone gets a taste of different things and shares in the overall enjoyment and profits.
Benefits Leading To A Better Financial Future
Now that you understand the term ‘mutual funds’, your next query would be how it will shape your financial future. There is a whole platter of benefits to investing in mutual funds. Right from diversification to liquidity, let me explain it all to you.
1. Diversification
It is one of the prior-most benefits of mutual funds which allows you to spread your investments over numerous asset classes. Diversification benefits us by creating an assorted portfolio that separates the obstacles faced in various sectors.
Let me explain it to you with the help of an example, suppose that you are in a food carnival. Now instead of eating a giant platter of Chinese, you will prefer to try a variety of cuisines that you will not regret later. Diversification is the variety of delicious cuisines that will help you to not regret your investments.
Let us say if the tech industry goes through a rough patch, the performance of other sectors in the fund, like healthcare or consumer goods might help balance things out.
2. Liquidity
Liquidity in mutual funds refers to selling your mutual funds to cater to your financial needs. When you choose liquidation, your money gets deposited in your bank, it might take a few days though. Here is an example to make it easy:
Imagine your bookshelf, tons of variety and genres. You want some easily accessible book for when you have a sudden urge to reread a favorite passage. But you also might have some special treasures that you wouldn’t want to get rid of quickly, even if you can’t reach them right away. This way, your bookshelf (like your mutual fund) can hold all your stories, both readily available favorites and long-term treasures.
3. Professional Management
Many individuals who are busy or maybe the newbie to the world of mutual fund investing, cannot conduct research on individual stocks. I mean, it is a time-consuming process for such individuals. This is where professional management comes into action. It helps people with their investments by providing professional expertise and guidance.
A fund manager keeps an eye on investments all the time and makes changes to the portfolio as needed to reach its goals. This expert management is a big benefit of a mutual fund for accomplishing your future goals.
4. Tax Benefits
The tax benefit is one of the common reasons that draws investors’ attention to investing in any particular type of mutual fund. Here giving you an instance of Equity Linked Saving Schemes (ELSS) in India which offer tax benefits. By investing in these funds, you can potentially reduce your taxable income.
Imagine you earn Rs. 6.5 lakh annually and invest Rs. 1.5 lakh in an ELSS fund that qualifies for a tax deduction. The government might allow you to deduct that Rs. 1.5 lakh from your income, your new amount will be 5 Lakh on which there will be no tax liability. This can be a great way to save money on taxes while also growing your wealth for the long term.
Focus On Setting Your Future Goals
Mutual Funds investment is all about achieving your future goals and plans as we discussed in the beginning. So it is very important to identify your plans and objectives behind a major investment. By setting clear financial goals before choosing mutual funds, you’re essentially packing for your financial journey. This helps you select the right investments to reach your goals and weather any unexpected storms like market fluctuations along the way.
Here are some common Financial Goals that people aim to accomplish by investing, though there are many reasons that can be based on a personal choice some of the major ones are stated:
- Emergency fund planning
- Child’s education expense
- Retirement Saving
- Saving for a house or car
- Dream vacation planning
Winding Up Thoughts!
In concluding thoughts, We hope you got the message that we wanted to convey to you. Meanwhile, we would like to make a clear point here by stating that this blog is for information purposes only, kindly consult your financial advisor before making such investments. All the above-stated features like liquidity, diversification, professional management, and Tax benefits, contribute to achieving our future goals and also securing a better financial future.
Please share your thoughts on this post by leaving a reply in the comments section. To learn more about mutual funds, contact us via Phone, WhatsApp, Email, or visit our Website. Alternatively, you can download the Prodigy Pro app to start investing today!
Disclaimer – This article is for educational purposes only and by no means intends to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing.
