Earlier, people used to believe that the steady rise in savings was the only way to secure the future. Today this thinking has changed significantly. People these days do not feel like keeping their earnings idle. Instead, they look for other opportunities to invest and grow their money.
When it comes to finding an ideal investment opportunity, a potential investor's first difficulty is an excess of options. There are several options to select from like shares, bonds, mutual funds, and other market securities. Moreover, every option has its own set of benefits and drawbacks.
However, investing in a mutual fund instead of individual stocks or bonds can reduce the level of risk to a greater extent. Nevertheless, the main question is why an investor should consider investing in a mutual fund and how it could reduce the amount of risk involved.
A mutual fund accumulates money from investors or financiers and invests that money in shares, bonds, and money market securities on behalf of the investors.
A mutual fund is a great investment tool for long-term investors who do not know much about how the stock markets work. Investors can browse through mutual fund schemes offered by mutual fund investment firms and choose one according to their objective, risk appetite, and requirements.
Is It Safe To Invest In Mutual Funds In India?
Here are some reasons that many experts consider why investing in mutual funds in India is safe:
Mutual funds are managed by experienced professionals who use their expertise to make investment decisions. This reduces the risk of losses due to wrong investment decisions.
Mutual funds invest in a variety of assets such as stocks, bonds, and other securities. This diversification reduces the risk of losses due to the poor performance of one particular asset.
The Securities and Exchange Board of India (SEBI) regulates mutual funds, ensuring that they operate within specific guidelines and follow strict investment policies. This provides investors with a sense of security and trust.
Mutual funds are required to disclose their portfolio holdings and performance regularly. This ensures transparency and allows investors to make informed decisions.
Mutual funds have low investment and management fees, making them a cost-effective investment option.
Mutual funds are highly liquid, allowing investors to buy and sell units conveniently.
FAQs
Mutual funds are regulated by SEBI (Securities and Exchange Board of India), adding a layer of safety via implementing mandatory guidelines and safeguarding policies. Mutual funds are obligated to disclose their portfolio holdings and performance regularly, ensuring transparency.
Which mutual fund is safest in India? ›
Top 10 Low Risk Mutual Funds to Buy in the Share Market in India...
- Invesco India Arbitrage Fund.
- Edelweiss Arbitrage Fund.
- Bank of India Overnight Fund.
- Mirae Asset Overnight Fund.
- Axis Overnight Fund.
- Kotak Equity Arbitrage Fund.
- Tata Arbitrage Fund.
- Nippon India Arbitrage Fund.
The chances of your mutual fund investment value going to zero are practically almost impossible as it would mean that all the assets in the fund's portfolio will have to lose their entire value. However, the returns from a fund can go to zero or even become negative.
Can a US citizen invest in mutual funds in India? ›
Absolutely, NRIs can invest in Mutual Funds in India, provided they follow the rules of the Foreign Exchange Management Act (FEMA). These investments pave the way for NRIs to benefit from India's economic growth directly.
Are mutual funds insured in India? ›
Mutual fund schemes with insurance cover offer insurance on group basis which means that all scheme holders are insured as a group by this life cover. This add-on feature is availed by SIP investors. This benefit is not for lump sum investors.
How risky are mutual funds in India? ›
In the category of market-linked securities, mutual funds are a relatively safe investment. There are risks involved but those can be ascertained by conducting proper due diligence.
Are mutual funds 100% safe? ›
Mutual funds are largely a safe investment, seen as being a good way for investors to diversify with minimal risk. But there are circ*mstances in which a mutual fund is not a good choice for a market participant, especially when it comes to fees.
How are Indian mutual funds taxed in the US? ›
If NRI taxpayers own mutual fund units or shares of Indian companies and receive dividend income from these investments, the income is typically taxable at 20% (plus any applicable surcharge and cess) without being eligible for any Act-provided deductions for things like life insurance, public provident fund, NPS, etc.
How to buy mutual funds in India from the USA? ›
NRIs must have a NRO or NRE bank account to invest in Indian mutual funds, as AMCs cannot accept foreign currency investments. All investments by NRIs are made in Indian Rupees. Non-resident Indians (NRIs) often seek investment opportunities in India to secure financial stability for themselves and their families.
Who Cannot invest in mutual funds in India? ›
However, in most of the cases a United States Person (U.S. person) meaning as defined under the extant laws of the United States of America, Residents of Canada and NRIs residing in any Financial Action Task Force (FATF) declared non-compliant country or territory cannot invest in a Mutual Fund in India.
Tax harvesting: Tax harvesting involves selling a portion of equity mutual fund units annually to realise long-term gains and reinvesting the proceeds into the same fund. This strategy helps investors keep their long-term returns below the Rs. 1 lakh threshold, thus avoiding long-term capital gains tax upon redemption.
Can mutual funds become zero? ›
The chances of a mutual fund becoming zero are very low. This is because a mutual fund invests in several assets. So, even if a few assets do not perform well, other assets can generate returns. This can balance the losses of non-performing assets.
Is LIC better than mutual fund? ›
The more viable choice between LIC policy and MF will depend on the investment needs of the individual. If an investor is more focused on creating wealth in the long run, mutual funds can be better. If the motive of the investment is to secure the future of one's family, life insurance can be a more beneficial choice.
What is the safest mutual fund to own? ›
5 Best Mutual Funds to Buy Now
| Mutual Fund | Assets Under Management | Minimum Investment |
|---|
| Vanguard Total Stock Market Index Fund (VTSAX) | $1.6 trillion | $3,000 |
| Fidelity 500 Index (FXAIX) | $512.4 billion | $0 |
| Fidelity ZERO International Index (FZILX) | $4 billion | $0 |
| American Funds Bond Fund of America (ABNDX) | $82.6 billion | $250 |
1 more rowTop Mutual Fund Houses in India
| S.No. | Mutual Fund House |
|---|
| 1. | SBI Mutual Fund |
| 2. | ICICI Prudential Mutual Fund |
| 3. | HDFC Mutual Fund |
| 4. | Aditya Birla Sun Life Mutual Fund |
6 more rowsMay 16, 2024
Best Investment Options in India 2024 to Get High Returns | Best Investment Plans 2024
- Real Estate:
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- National Pension System (NPS):
- Systematic Investment Plans (SIPs):
- Gold:
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- Cryptocurrency:
For beginners, apps like Groww & Zerodha are the safest & best mutual fund apps for investing in mutual fund investment in India. However, you can have a look at mutual fund apps like ET Money, Paytm, 5paisa, myCAMs, Kuvera and others.
