Mutual funds are becoming a very popular way for individuals to invest in India. Instead of buying shares in individual stocks, people are opting for mutual funds these days says Sachin Karpe.
There are 4 major pros of investing in mutual funds:
- Mutual funds are an easy way for an investor to buy stocks which would otherwise be difficult to manage.
- Mutual funds can buy numerous individual stocks across various industry sectors, which make it more diversified.
- Mutual funds are handled and managed by professionals who are qualified and have industry experience.
- There is no maximum or minimum amount for investing in mutual funds. You can invest even if you don’t have much financial or investing experience.
The Cons of Investing in Mutual Funds
But, where there are advantages, there are disadvantages too. Below are 4 major cons of investing in mutual funds:
- Managing mutual funds could be expensive. There are sales commissions involved. There is an annual fee, regardless of the performance.
- Mutual fund stock prices are calculated and disclosed to public only once every day. Every mutual fund is made for multiple investors, the price fluctuates depending on the net asset value, and hence the price isn’t set until the market day ends officially.
- In mutual funds long term capital gains are taxed at a lower rate than short term capital gains.
- In mutual funds you can make a loss on an investment but still end up paying taxes.
This is what I, Sachin Karpe, feel about mutual fund investments.