5 little-known benefits of mutual funds that most investors miss

Entering the market through mutual funds is an excellent starting point for first-time investors. Beginning your investment journey with a Mutual Fund (MF) Systematic Investment Plan (SIP) allows you to gradually enter the market without the pressure of making large one-time contributions. By investing a comfortable amount at regular intervals, you can align your investment habits with your financial goals and cash-flow rhythm.

Here are five little-known benefits of mutual funds that most investors miss.

1. Liquidity

Generally speaking, mutual funds have liquidity, which allows you to buy or sell your shares quickly. Mutual funds give you immediate access to your money when you need it, unlike other assets like real estate. "For your emergency corpus, liquid funds can be a fantastic substitute for a savings bank account because they usually provide a marginally higher return with very little risk and let you access your money in a day or two," said Mumbai-based tax and investment expert Balwant Jain.

2. Loan against MF

Loan Against Mutual Funds (LAMF) is a secured facility from banks/NBFCs that allows you to borrow a temporary loan

3. SIP top-up

"SIP Top-Up is one automated instruction that all investors should use to increase their savings with their rising income. You can decide on an amount or a percentage growth by which you want to increase every year," said  Ronak Morjaria.

4. Flexibility Beyond SIP

SWP allows you to withdraw a fixed amount at regular intervals. This is great for generating a tax-efficient retirement income from your corpus without redeeming the entire investment.  

You can move a certain amount between funds using STP (for example, from a low-risk debt fund to a higher-risk equity fund). This is a clever way to progressively invest in stocks while controlling risk and use rupee cost averaging.

5. Access to 'Direct Plans'