Fri. Nov 27th, 2020

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Why investing is so important for long term financial planning

4 min read

Why is investing so important and crucial? If you are someone who is already trying to manage a budget and pay down debts, you may wonder why you should add another financial task to your ongoing to-do list. But investing might be the most important of all. Investing in mutual funds is essential for good money management because it ensures financial security for both present and the future. Not only do you end up with more money in the bank, but also end up with another form of income flow. Investing is the only way that one can achieve both growing wealth as well as passive income. Following are a few of the benefits of investing in mutual funds:

1. Numerous schemes
Mutual Fund schemes are designed in order to cater to the diverse & varied requirements of individuals. In hindsight, mutual fund schemes are classified into three major categories. That includes Equity Funds, Debt funds as well as hybrid funds. Equity Funds are the ones where you invest in equity and other equity-related instruments. Debt Funds are the schemes where you invest through fixed income instruments like treasury bills, government bonds, commercial papers, etc. Hybrid Funds, which are also known as Balanced Funds are investments made in both equity as well as debt instruments. Apart from the above mentioned schemes, there are various other categories such as gold funds, sector funds, ELSS, and much more that you can find and invest in using a mutual funds app like Scripbox which is known for their easy and secure investing in mutual funds to achieve financial goals.

  1. Diversification

One of the biggest advantages of investing in mutual funds is that it gives you the benefit of immediate diversification. One may not have enough money in order to spread their investments in varied stocks and sectors, but by pooling money from thousands of similar investors, an online mutual fund can spread your investment and hence, the risk that comes along with it. Since it is pretty much unlikely that all the stocks will go down by the same proportion on any given particular day. This ensures that you are safe from incurring huge losses from any one single bad investment.

  1. Liquidity

Mutual Funds are usually considered as one of the liquid assets that can be converted into cash conveniently and easily. For schemes such as Liquid Funds, individuals can get an instant redemption facility through which they can get back their money within 30 minutes into their bank account, once they process the redemption request from their end. For many such schemes, the redemption tenure is short as a result of being prescribed by the authorities. In mutual funds, you can easily move your money in and out of such investments.

  1. Tax saving benefits

There are various tax benefits available to individuals on their investments in mutual funds. ELSS (Equity Linked Savings Scheme) is one of the tax saving instruments through which individuals can enjoy benefits of investing as well as get tax deductions. People investing in ELSS can probably claim a tax deduction of up to INR 1,50,000 under the Section 80C of the Income Tax Act, 1961. Also, there is no tax on the capital gains on units of equity schemes held for more than a year. Similarly, short term capital gain is applicable for redemption of debt mutual funds within 3 years.

Mutual funds also come in various different forms, one such form is that as an SIP. What is an SIP? An SIP (Systematic Investment Plan) allows you to invest a fixed amount periodically in a mutual fund scheme of your choice. SIP is an automated way of investing daily, weekly, monthly, and quarterly. It offers a well disciplined as well as a passive approach to investing in order to create wealth in the long term by using the power of compounding. Since the whole amount is invested in regular intervals, usually on a monthly basis, it also greatly reduces the impact of market volatility.

Also, one can check their returns using an SIP calculator, which is a form of simulation that allows individuals to estimate the return on mutual fund investments made through SIP. Investing through SIPs in mutual funds is a popular investment option for many millennials. SIP calculators are usually designed to give potential investors a heads up on their mutual fund investments. However, it does not account for the exit load and expense ratio. It is just an online tool used to calculate the SIP amount in order to achieve financial goals based on an expected annual return amount.

So, all in all, Investing in mutual funds is something that’s very important in fulfilling your goals, in providing you with financial security and should be included in your financial planning. You can now start investing risk free by using an app called Scripbox, which is recognized for their best financial services, whether you want to invest with in mutual funds, SIP or with lumpsum investment amounts, track your investment’s performance, save tax, get wealth management tips, get better returns, grow your money with best investment practices and much more.

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