In Pakistan, one of the most popular ways of saving is Ballot Committee (BC), more commonly known as committee. Every month each participant of the committee contributes a specific amount to the pool which goes to a pre-decided member. This cycle is repeated so that every member receives the collected amount. Most commonly Committees are used to save up for household appliances, furniture or even to accommodate travel needs
While saving using Committees may be paper-less and simple, investing in a Mutual Fund is a much more efficient way to meet your saving needs since it reaps better returns and profits. Following are 3 reasons why investing in Mutual Funds is a better saving option than a simple committee.
1. Doesn’t Let Inflation Decrease the Value of your Money:
While the simplicity of a Committee may seem attractive at the time, you end up losing money in such an arrangement. Suppose you’re in a Committee which comprises of ten people, each contributing Rs. 10,000 for ten months. The whole sum of each member will come out to be Rs. 100,000. However, after ten months, the value of the same Rs. 100,000 would be lesser due to the inflation in the market. Anyone receiving the money towards the end of the cycle will suffer the greater loss.
When you invest in Mutual Funds, thanks to monthly compounding your investment value keeps increasing and is not affected drastically by inflation.
2. Gets You More Returns:
Simply put, Committee is nothing but a disciplined way of saving for short term goals. At the end of the committee, you only get the same amount of money you’ve put aside which is more likely to be of lesser value thanks to inflation. But when you invest in Mutual funds, you gain profits on your monthly savings which increases your purchasing power. You end up walking away with more than just a simple sum of you contribution.
3. Reliability of Fund Managers:
The most common misconception about investing in Mutual Funds is that you need to be an expert to get started. But actually, when you invest you’re guided by a team of Fund Managers who are financial experts who understand how and where to invest your money to get you maximum returns. In a Committee system, there’s no such entity looking after your money.
The benefits of investing in Mutual Funds outweigh the factor of convenience that Committees offer. Whether it’s for short term goals or even long term ones, investing in Mutual Funds is a much more profitable investment option for everyone.