7 reasons you should invest in mutual funds

Learn how mutual funds can help take some of the anxiety out of investing

If you’re looking for investment options, you should definitely consider mutual funds.  Mutual funds, a pool of professionally managed securities, are one of the most reliable investment avenues. It is a smart investment choice for both professional and fledgling investors because it is liquid, convenient and reliable.

Here are some of the reasons why you should consider investing in mutual funds:

1. Competitive Returns 


 

Mutual funds are a long term investment option that protect the purchasing power of your money over the years. Additionally, they yield a higher return than bank deposits in the short term and beat other assets of the same class when it comes to returns in longer term.

 

2. Professional expertise 


 

Many investors do not have the time or money to buy individual securities. Hence, they take advantage of the professional expertise of mutual fund managers who analyse and research the risk return trade-offs in the equity market to create a risk-adjusted pool of mutual funds.

 

 

3. More convenience and control 


 

You can get started with your first investment with as little as Rs. 500. It is advised that you first do your research on where to invest, calculate how much and for how long do you need to save to achieve your future goals, and then just start saving. There is even an option available to create your mutual fund account in merely three minutes on an online digital investment service called iSave.

 

 

4. Choice and diversification 


 

Mutual funds offer multiple options based on risk/return trade off, conventional or Shariah compliant, small or big contributions and growth/income units. Since you buy a pool of securities, your risk automatically reduces. Besides that, mutual funds also allow you to reduce your diversification cost by sharing transaction costs with other shareholders, brokerage houses.

 

 

5. Tax savings 


 

Investments in Mutual Funds and Voluntary Pension Schemes (VPS) allow you to claim tax reduction (according to Section 63 of the Income Tax Ordinance, 2001) By simply investing and submitting your account statement to your payroll department, you can save up to 50% on your income taxes.

 

 

6. Liquidity 


 

Mutual funds are considered liquid because they can be redeemed in a day through a very simple process. Moreover, since these units are well integrated with the banking system, most funds can send money directly to your bank account.

 

 

7. Greater security 


 

Mutual funds are watched by regulators, settlement house (stock exchange), trustee, auditors and in Pakistan’s case, boards of Shariah advisors as well. The mutual fund prepares and releases periodic financial statements that give a detailed account of the major activities undertaken by the fund. All mutual funds have to register with Securities & Exchange Commission of Pakistan (SECP) and abide by its laws.



They help you with life’s short term plans and long term dreams. As they come in different varieties, you are bound to find one that is suitable for your particular need and the amount of risk you want to take. There is just one thing to remember when investing in mutual funds- all good things in life take time and investments are no different!