Can’t select the best companies? Let Mutual Funds do it for you

The stock market isn’t for everyone. A lot of thought and hard work goes behind investing in the stock market as one has to understand the nitty-gritty of the asset class before investing.

For instance, to get a full grasp of the stock market, you have to understand jargon, learn to read balance sheets, financial reports and take out time every day to manage the stock portfolio.

Moreover, to be a profitable stock market investor, you have to make the right choice in selecting the best companies by assessing their market capitalisation, stock’s past performance, financial reports, corporate governance issues, etc., which can be overwhelming. Besides, you also require capital to invest in the best companies on the stock market at once, which may not be desirable for many investors.

Thus, thorough due diligence, capital, patience, risk-reward balance, and more is required in understanding the stock market, especially if you are new to equities.

That said, many new and even existing investors either don’t have the knowledge or the time to read about different companies and invest accordingly. Here, mutual funds can be a better option to invest in.

Equities Vs Mutual Funds

One of the biggest advantages of mutual funds are it offers you diversification. By investing in a mutual fund, you get exposure to different asset classes including equities, which saves you from choosing the best companies by yourself.

Also, mutual funds are handled by professional wealth managers. Since the fund managers are well-experienced, they take due care of your investments and decide the asset allocation based on the risk profiling.

Moreover, mutual funds give you an option to of Systematic Investment Plan (SIP), wherein you can invest a certain amount every month, saving you from putting all the monies at once, which happens in the stock market. By choosing a SIP, you can follow your financial plan with discipline and invest over a long time horizon.

Also, it is a convenient option as you don’t have to track your mutual fund daily and trade.

Meanwhile, many mutual funds also come with tax-saving option, helping you to create wealth and save taxes at the same time.

How to choose mutual funds

You can choose the type of mutual fund depending upon the nature of your goal. Many mutual fund houses offer different fund categories with risk labels. You can choose a funds depending on your goals, whether they are travelling, buying a house, child’s education, marriage, or retirement. Before you start a SIP in mutual funds, you must assess the risk associated with it, its past performance, NAV, etc.

Ultimately, less knowledge about an investment tool should not hamper your financial planning. It is better to invest in tools that you are comfortable with, seek professional help and invest to generate desired returns.

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