Economy

5 reasons why your mutual fund investment should be long term

Mutual fund investments refer to a financial investment scheme that collects money from a variety of people and then this entire amount of money is invested in bonds, debt funds and stocks. Individuals can choose to invest money in mutual funds in India in a lump sum way or through Systematic Investment Plan or SIP mode. In simple words, top mutual funds help the investor to invest in the stock market. However, if you are a beginner, then you might find understanding the stock market quite a difficult task, and that might increase the chances of you losing your money due to lack of understanding. It is therefore important to have a basic idea about the fundamental things about mutual funds and to invest in the stock market.

Many people face the dilemma about the right time to investing thinking that the market rate might change tomorrow. However, it is not possible to predict the market, and that is why it is important to go for long term investment in mutual funds. Long-term mutual fund investments have their own set of benefits, and some of the perks of long term investment are mentioned below.

Tax benefits for a longer time:

If you are investing in the mutual fund for over a period of a year, then the primary gain from that investment remains tax-free. You can thus avail tax benefits by investing in mutual funds for longer terms. There is also a tax exemption on the equity mutual funds that come under the 80C Section of the Income Tax Act of the year 1961. According to this scheme, a person investing in mutual funds is liable to enjoy an exemption of 1.5lakhs rupees from their taxable income.

 

Get more frugality than different portfolios:

Mutual funds give you the chance to invest more money over a period of timegradually. You can start your mutual fund investment with a meager amount of 500 rupees and gradually increase the amount as your capacity permits. Thus, you don’t need a hefty amount to start with a long term plan.

Chances of taking risks:

If you are going for a long term mutual fund investment option, then you will have more chances to take risks. You will be able to study the history of the specific market carefully and thus take calculated risks. Though history cannot be completely trusted, it will surely give you an idea about the market that would help you to understand your risk factors.

Less fear of losing funds:

Another benefit of long term investment is that when you are going for a long term investment, your chances of losing the funds get lower. You will have a secure and certain outcome from your investment.

Get diversification:

With long term mutual fund investment, you will be able to avail diversification that is one of the primary benefits of investing in mutual funds.

These are the primary things that an investor needs to know about the benefits of long-term investment.

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Geoffrey Burton
Geoffrey deals with the economy section of our website. He has a degree in journalism. His column is a stark narration of economic facts, market trends, and statistical proof of his findings. He warns investors of oncoming crises and reports what the banking institutions of the nation are up to. His aim is to make his column the go-to for the study of live economic trends in the nation.