Advantage of mutual funds, Financial Management

Advantage of mutual funds

Mutual Funds are advantageous to individual investors in relation to their direct involvement in investment portfolio activity covering the following aspects:

Reduced Risk

Mutual fund provides small investors access to reduced investment risk resulting from diversification, economies of scale in transaction cost and professional finance management.

Diversified Investment

Small investors participate in larger basket of securities and share the benefits of efficiently managed portfolio by experts, and are freed of keeping any records of share certificates, etc., of various companies, tax rules, etc.

Stress-free Investment

Investors get freedom from emotional stress involved in buying or selling securities. Mutual Funds relieve them from such stress as it is managed by experts who act scientifically while buying and selling for their clients.

Revolving Type of Investment

Automatic reinvestment of dividends and capital gains provide relief to the members of Mutual Funds.

Selection and Timings of Investment

Expertize in stock selection and timing is made available to investors, so that invested funds generate higher returns.

Wide Investment Opportunities

Wide investment opportunities that create an increased level of liquidity for the funds holders become possible because of a package of liquid securities. These securities could be converted into cash without any loss of time.

Investment Care

Care for securities is available through mutual fund to the investors relieving them of various rules and regulations.

Tax Benefits

Income tax exemption has been ensured for Mutual Funds. While originally, only such Mutual Funds as are set-up by public sector banks or a public financial institution were exempt from tax, now the benefit of tax exemption has been extended to all Mutual Funds. Investors are eligible for deduction under section 80L of the Income Tax Act in respect of the dividends from units or shares of Mutual Funds and under section 88CC in respect of contributions made by investors to unit-linked insurance plan of UTI and LIC Mutual Fund.

The above advantages are only illustrative and not exhaustive as there is a scope of more to be added to the list in the light of individuals own experience(s).

 

Posted Date: 9/11/2012 1:08:30 AM | Location : United States







Related Discussions:- Advantage of mutual funds, Assignment Help, Ask Question on Advantage of mutual funds, Get Answer, Expert's Help, Advantage of mutual funds Discussions

Write discussion on Advantage of mutual funds
Your posts are moderated
Related Questions
15 points) You need to develop a personal budget. Try to be as realistic as possible. If you are going to school and not working then do some research to find out what salary you w

Case Study: Silicon Cliffs is a big private company that undertakes consultancy activities and services in the field of building construction. Silicon Cliffs has gained peoples

Trade credit is free credit.  Do you agree or disagree with this statement?  Explain. Trade credit isn't free.  It has a value.  Who bears that cost depends on the conditions o

The Managing Director of your firm is thinking aloud about an appropriate gearing level for the company: "The consultants I spoke to yesterday explained that some academic th

Q. What is Qualities of Pay Back Method? Qualities of Pay Back Method:- (i) Simple: - The most important merit of this method is that it is simple to understand and easy to

The director of capital budgeting for a firm has recognized two mutually exclusive projects, A and B, with the following expected net cash flows:

(b) What are the possible advantages of an offshore pension fund?

To calculate the Cost of Capital, we will use the Weighted Average Cost of Capital (WACC) formula             WACC = (E/V) X R E + (D/V) X R D X (1 - T C ) where

Government intervention The government might look for intervene in the take-over bid because of fears that the market share of the combined group would constitute a monopoly wh

Which ratios would a potential long-term bond investor be most interested in? Explain. Potential and Current lenders of long-term funds, such as bondholders and banks, are con