A mutual fund is a type of investment vehicle in which investors pool money for earning returns over a period of time. The collected money gets managed by a fund manager who is an investment professional. The money gets invested in various securities like bonds, gold, stocks, and other assets to provide potential returns. The profits and losses coming from these investments are shared by investors in proportion to their contribution to the fund.
There are trillions of dollars invested in mutual funds all across the world. Mutual funds offer a lot of advantages. So, there is no surprise there is so much money invested in mutual funds. There are mainly three types of funds that include; debt funds, hybrid funds, and equity-oriented funds. Debt funds invest in government securities and corporate bonds. These funds offer reasonable returns to investors. It is considered less risky than the other funds. On the other hand, equity funds invest in stocks and provide capital appreciation to investors. Here we must recommend you invest in ICICI equity mutual fund to gain better returns.
However, there are risks in investing in mutual funds. Even their fees can sometimes be high which creates a drag on overall returns. In this post, we are going to discuss the benefits of personalized mutual funds. Thus you can understand the right type of investment for you. So let’s have a look at the benefits of personalized mutual funds.
Goal-based investing
To achieve maximum benefits, it is essential to invest based on certain goals. Throughout your lifetime, your goals may change and it may include many objectives such as buying a home, family planning, children’s education and wedding, retirement etc. The goals may be short, medium, and long-term. Personal financial planning tools provide customized recommendations that help to evaluate your financial goals at different phases in your life. Thus it offers the most appropriate investment options to meet your needs.
Reviews and recommendations
The overall evaluation and analytical process are automated using scientific techniques. It eliminates all human intervention and bias to offer the best investment recommendations. A team of highly skilled personnel has developed the investment engine that offers customized recommendations right on your smartphone.
Simple and stress-free investing
Investing in mutual funds ensures that all your investments are in a single location. Thus you can track and monitor portfolios easily. Personal financial planning tools not only offer customized recommendations but also provide a regular update on the performance of your investments. Besides, it ensures paperless and quick transactions.
Multiple options
You may not have experienced the expertise to analyze and evaluate multiple investment options. While you are choosing a reliable investment engine, the tool does all the work for you. Thus you get the investment recommendations directly on your phone. Besides, you can invest a huge amount through SIP according to your financial situation.
Diversification
Without customized recommendations, there is a risk of portfolio concentration. It occurs because you are well versed in specific industries or a few macroeconomic factors. Your limited understanding will get reflected in your investment portfolio. It is very risky as it results in portfolio concentration. In such circumstances, any negative event may result in huge losses or erosion of your principal investment. Customized recommendations are not limited to theme, sector, or industry-specific investment options. It lets you diversify your investment portfolio and overcome the higher risk.
Convenience
Mutual funds are very easy to invest in. You can hold them in various accounts including employer-sponsored retirement accounts, individual retirement accounts, or brokerage accounts. All you need to do is to place an order for the number of shares you want to purchase and wait for the order to be filled at the end of the day.
Conclusion
The best mutual funds let you invest in a professionally managed investment portfolio with built-in diversification. It makes them convenient. Investors don’t need to worry about buying and selling securities. Also, you can reinvest in capital gains and dividends automatically. It allows investors to fully automate their strategy. However, mutual funds have their quirks. Some mutual funds come with sales commissions and high fees. But you can avoid these issues by carefully selecting your mutual funds.