Mutual Funds Myths
Mutual funds are the most preferred investment avenue for a majority of people. They offer steady growth over a period of time with the option of Systemic Investment Plan (SIP) and well-managed enhancement of capital by financial experts. While more and more people are learning about the benefits of Mutual Funds and switching to them to create wealth and achieve financial goals, many remain stuck in Mutual Funds Myths due to incomplete knowledge of Mutual Funds.
Not knowing enough about something is always enough to discourage an investor, but it is only through information and learning that one can get over this uncertainty
Here are some myths about mutual funds that steer rookie investors away from mutual funds.
Myth 1 : Mutual Funds are only for long-term investors, there isn’t anything for short-term investors
The Fact: It is undeniable that long-term investors benefit more from mutual funds. However, schemes with shorter duration have been specifically designed for short-term investors.
For such schemes, the tenure can range from one month to over a year. Investors can pick the ones that suit their needs and invest accordingly.
These schemes allow short-term investors to make the best of mutual funds.
Myth 2: One needs a lot of money to invest in Mutual Funds.
The Fact: The minimum lump-sum amount for investing in mutual funds is only Rs. 5000 for the first time. The subsequent amount that one can invest in Mutual Funds can be as low as Rs. 1000.
For Equity-Linked Savings Scheme (ELSS) the amount is only Rs. 500, which is the same for Systematic Investment Plans (SIPs).
This makes it very easy for anyone to invest in a mutual fund since it does not require you to make huge investments.
Myth 3: Investing in a Top-rated Mutual Fund will bring you better results.
The Fact: The non-securities market is very dynamic, especially for mutual funds. The performance of any scheme is subject to the fluctuations of the market. Hence, the ratings of a Mutual Fund do not hint at its future performance at all.
Similarly, if a mutual fund has had a high rating for a few months, it does not prove its reliability. Good performance of any fund in the past does not mean that it will continue to do the same in the future as well.
To evaluate the investment made in a Mutual Fund Scheme, one should keep tabs on its performance to decide whether to continue with the investment or exit from the mutual fund.
Myth 4: It is compulsory to have a Demat Account in order to invest in Mutual Funds.
The Fact: One does not need a Demat account for investing in any mutual fund other than Exchange-Traded Funds (ETFs).
Any other Mutual Fund, open-ended or close-ended, does not require the investor to hold a Demat Account, and it is the choice of the investor to hold the units of the fund in a Demat account or use the usual statement mode.
Myth 5: Mutual Fund Investments are same as investing in the Stock Market.
The Fact: Mutual Funds are of several types, one of which are Equity funds which are invested in the stock market.
However, mutual funds are not limited to the stock market. However, many of the other options are not available to investors due to large ticket size, but Mutual Funds do help in combatting this issue.
Myth 6: Mutual funds are for Experts.
The Fact: This myth stems from the previous myth since many believe that only market experts can excel in the stock market. Mutual Funds allow even unskilled investors to make a profit since a professional expert handle the mutual fund that they contribute to.
Therefore, one does not need any in-depth knowledge of the market to invest in Mutual funds.
Myth 7: Funds with lower NAVs are cheaper.
The Fact: NAV is the current market value of a fund. The older the fund, the higher will be its NAV since NAV grows over time. However, if the NAV of a mutual fund is high, so will it be its price. While this allows one to buy cheap funds, it does not promise results nor does it serve as a prediction factor.
It is crucial to not remain in doubts and possess accurate knowledge; this is only accumulated over time and honed with experience. Now that you know the facts about Mutual funds, you can invest with complete confidence. Mutual Funds serve as the easy and reliable investment vehicle for many people due to their continual results and easy accessibility.