Reasons why mutual funds can be the better option

2 minutes, 29 seconds Read

All of us have heard at least once that the best thing you could do with your money is invest it. The idea of making your money work for money has been glorified for years but it is only now that many people are truly applying it. Why now you ask? Because it’s very easy now for anyone to invest their money. All you need is a smartphone and internet, which everyone has access to today. With the ever-increasing number of investment apps, the number of investors has dramatically increased. There is no doubt that Mutual Funds are one of the best types of investments. As you may guess, mutual fund app numbers and their investors are rising. With the advantages that Mutual Funds have over other investment options, the increasing number is to be expected.

Here’s why mutual funds can be the better investment option:

Liquid Nature:

When it comes to finance, liquid means easily convertible to cash in a short amount of time. Mutual funds can be redeemed to cash in a short amount of time. This is a great advantage as your money isn’t locked in for a fixed amount of time and you can convert it in cash anytime. In uncertain times, mutual funds as investments can be of a lot of help. Take the lockdown period for example, during the pandemic having some liquid assets at hand would have helped you counter any uncalled-for situations. You can track mutual fund you own and redeem it through the investing app you use.

Power of Compounding:

Compound interest means the interest on the interest that you get on your principal amount. Also known as compounding, this is an effective way to grow your money. This, however, works only if you are investing for a long period. If you consistently invest in mutual funds, the power of compounding will help you accumulate wealth over time. You can track these through the mutual fund tracker available in your investment apps. Money will grow by the power of compounding in mutual funds if enough patience and financial discipline are practiced.

Offers More Diversification:

For someone new to the world of investing, it may be difficult to figure out where to invest. Many people get into the share market as it’s the most popular and heard of investing form. However, as a beginner, there are only a certain amount of stocks you can buy. Sometimes a stock you want is of a much higher price and hence you can’t buy it. Mutual funds solve these problems and more. The pooled money from various investors is handled by fund managers who are expert investors. They invest in various company stocks and even other forms of investments to produce returns. This helps achieve diversification. A seasoned investor knows the importance of diversification. In case the market for a specific industry goes down, due to diversification, you have investments in other industries too and thus you may not end up losing everything.

author

David Cohen

Rachel Cohen: Rachel is a sustainability consultant who blogs about corporate social responsibility and sustainable business practices.

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