Mutual funds are an investment vehicle, which collects the money from various investors and invests in securities like bonds, stocks, equity and other assets. Mutual funds are the best investment tool for those investors who do not have much knowledge about investing. An investor must always choose the mutual fund scheme based on his financial goals.
Here some advantages of investing in Mutual funds:
Many people refrain from investing because it needs effort and commitment. For them, investing with ease matters a lot which is provided by mutual funds. By investing in a mutual fund, an investor can gain access to a broad range of the financial market. With a dedicated relationship managers that most financial institutes provide, it becomes easy to understand and invest in Mutual Funds.
Diversification of risk
Mutual funds invest investor’s funds in multiple stocks in the share market in order to diversify the risk. This way if one stock does not perform the other one can compensate it’s loss with its higher returns.
Varied Mutual Fund schemes
There are multiple Mutual Fund schemes which can meet the investment objectives of an investor. These multiple types of mutual fund schemes provided by different companies provides access to a wide range of financial instruments and sectors. This gives an investor to choose funds according to his budget, expectation and risk.
Due to lack of expertise, many investors commit mistakes while trading in share market. This could lead to unnecessary risk and loss to an investor. Under mutual funds, investor’s funds are handled by a fund manager along with his team who keep a track on the financial market and invest on accordingly.
Mutual funds are currently available in various types in the market. Some of the most popular ones are Equity funds, Debt funds, Money market funds, Index funds, balanced funds, Income funds, Fund of funds and Specialty funds.
Those investors who are investing in equity funds must consider multi-cap mutual funds. Multi-cap mutual funds are diversified mutual funds which can be invested across different market capitalizations like large-cap, mid-cap and small-cap. Multi-cap mutual funds can exploit the opportunities available in the market and manage the risks.
Multi-cap mutual funds are recommended for those investors who are moderate risk-takers. Under this scheme, investor funds can be invested in small-cap or mid-cap stocks which are riskier than large-cap schemes. But due to exposure to small and mid-cap stocks, multi-cap mutual funds scheme can give higher returns.
Multi-cap funds are recommended to investor’s because it offers the benefit of relatively low risk of large caps and the chances of higher growth of mid and small caps in moderation.
It also has the flexibility which can be used by the fund manager to increase mid and small-cap exposure when opportunities present themselves or vice versa. This flexibility is not available on pure m-cap categories such as large-cap or midcap funds.
So next time, when you want to invest in equity-based mutual funds do consider multicap fund for chances to earn higher returns.