The benefits of mutual funds for self-employed individuals

Posted On: 14 July 2023

mutual fund investment for self employed

Self-employment has emerged as a popular option for many people seeking flexibility in their professional life. While being your own employer undoubtedly offers several benefits, it also brings unique financial challenges such as handling investments and planning for the financial future. That’s when opting for a mutual fund investment can help you deal with these challenges and outline a well-defined financial strategy.
Whether you are a business owner or a freelancer, mutual funds can be a useful addition to your financial plan. Here, we will help you understand the benefits of mutual fund investment for self employed individuals that can help them achieve their financial goals.

Table of contents:

Benefits of mutual funds for self-employed individuals
FAQs

Benefits of mutual funds for self-employed individuals

Regular investments with systematic investment plans (SIPs)

Self-employed individuals can consider growing their corpus through regular investments through Systematic Investment Plans (SIPs) offered by mutual funds. SIPs allow investors to contribute a fixed amount at regular intervals, thus instilling financial discipline and reducing the burden of making lump-sum investment in mutual fund. Moreover, by consistently investing in mutual funds through SIPs, self-employed individuals can benefit from the power of compounding and potentially accumulate substantial wealth over time.

Emergency fund corpus with liquid funds

It’s important for self-employed individuals to build an emergency fund to withstand unexpected financial setbacks. Mutual funds offer liquid funds, which provide the flexibility of quick and hassle-free redemptions. By allocating a portion of their savings to liquid funds, self-employed individuals can create a readily available corpus for emergencies without compromising their long-term investment plans.

Save taxes with investment in equity linked savings schemes (ELSS)

Self-employed individuals can also get tax benefits by investing in Equity Linked Savings Schemes (ELSS) offered by mutual funds. ELSS not only provide the potential for long-term capital appreciation but also offer tax benefits under Section 80C of the Income Tax Act. By allocating a portion of their investment portfolio to ELSS, self-employed individuals can optimise their tax liabilities while participating in the growth potential of the equity markets.

Investing surplus incomes

Occasionally, self-employed individuals may receive surplus income. Mutual fund investments can prove to be a suitable option for deploying these surplus funds to generate potentially higher returns. By investing surplus income in well-diversified mutual funds, self-employed individuals can enhance the growth potential of their wealth over long term and benefit from the power of compounding.

Retirement planning

Saving for a rainy day is always a healthy practice. Likewise, it is imperative that self-employed individuals plan meticulously for their retirement years. And who doesn’t want a comfortable retirement! While some may plan to go on a world tour after retirement, others may wish to spend the rest of their lives comfortably at a self-owned farmhouse. Thus, retirement planning for self-employed individuals is not different from any other person.
Mutual funds are a good option for long-term wealth accumulation with a systematic withdrawal plan to cater to financial needs during retirement. By investing in mutual funds, self-employed individuals can secure their post-retirement life and enjoy financial independence. Having said that, many assume that by investing in a mutual fund once they are done with retirement planning. But it doesn’t work this way — one needs to keep track of the fund’s performance regularly with an eye on better returns.

Conclusion:
In the intricate world of personal finance, self-employed individuals can enhance their financial journeys by tapping into the vast potential of mutual funds. With regular investment in mutual funds through SIPs, self-employed individuals can lay the foundation of disciplined wealth creation. The availability of liquid funds ensures the readiness of an emergency corpus, safeguarding against unforeseen financial challenges. Moreover, the tax-saving benefits of ELSS provide an opportunity for optimizing tax liabilities while participating in the growth potential of equity markets.
By effectively deploying windfall incomes into well-diversified mutual funds, self-employed individuals can witness their wealth grow over time. Lastly, retirement planning through mutual fund investment enables self-employed individuals to secure a financially stable post-retirement life.

FAQs:

How can systematic investment plans (SIPs) benefit self-employed individuals?

SIPs can help self-employed individuals by inculcating financial discipline in them. Moreover, they can leverage the power of compounding, accumulate wealth over time, and achieve their financial goals by investing in SIPs.

Can liquid funds help self-employed individuals build an emergency fund?

Liquid funds can help self-employed individuals to build an emergency fund. With their swift and hassle-free redemption process, liquid funds offer the flexibility to access funds during unexpected financial emergencies.

How can self-employed individuals deploy surplus income using mutual funds?

Self-employed individuals can park their surplus income in well-diversified funds. This allows them to potentially earn returns on their surplus funds and enhance the growth potential of their wealth over time.

Can mutual funds be a suitable option for retirement planning for self-employed individuals?

Yes, mutual funds can be a suitable option for retirement planning for self-employed individuals. By investing in mutual funds, they can secure their post-retirement life and enjoy financial independence. However, it is crucial to monitor the fund's performance regularly to optimize returns and align investments with retirement goals.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.