More Reasons To Invest In Mutual Funds

More reasons to invest
There are two more solid reasons to invest in mutual funds. Securities & Exchange Board of India (SEBI) has abolished entry load on mutual fund units. This has benefitted the investors as they no longer have to pay any charge while buying units of mutual funds. However, the move has had some negative fall-out as abolition of entry load is a disincentive for MF distributors. “At the aggregate level, the industry was growing at the rate of close to 40 per cent in October on a y-o-y basis. But what concerns us is that there has been no growth in the equity segment. In fact, there has been net outflow both in August, September and October. This may be because people want to book profits and new people are not coming in. Not much incremental money is coming from the retail sector,” says Kurien.

SEBI proposal to allow MF units to be traded on stock exchanges in the near future would also benefit the investors. This move is expected to take mutual funds to all the nooks and corners of the country. “The rationale behind this move is to enhance the reach of mutual fund schemes to cover more towns and cities beyond Tier 2 towns by leveraging the existing infrastructure set-up (1,500 locations, 200,000 terminals) for stock trading.”, says Trivedy.
“SEBI’s new guidelines to enable the brokers to buy and sell mutual funds through the stock exchanges will increase the reach and provide easy facility for investors and distributors to invest in mutual funds,” says Dr. AP Kurian, Chairman, Association of Mutual Funds in India.

But Caution Is The Key
The cardinal truth that mutual funds are subject to market risks needs to be borne in mind by all mutual fund investors at all times. Mutual fund NAVs fluctuate depending on the market movement. However, they should never try to time the market, because mutual fund investing is not about timing the market. Mutual funds are not for the traders because the NAVs don’t fluctuate violently like the stock prices do at times on a single day. The upward or downward movement of NAVs is slow and steady, so mutual funds are for investors with a medium to long-term view. However, the benefits of investing in mutLial funds far outweigh the risks. Hence, one can say without any hesitation that equity mutual funds are the best route to invest in the stock market for retail investors. And the best time to invest in Indian mutual funds is now.