Debunking the common Myths about Mutual Funds
Relying on myths and hearsay facts can have a debilitating effect and can lead you to make erroneous conclusions. Similarly, believing myths about investment vehicles such as Mutual funds can cause unnecessary anxiety. Here, we debunk some common myths about Mutual Funds to have a seamless investment experience.
Myth 1: Mutual Funds are ideal for long-term investment
Fact: Mutual Funds investments are often goal-based. Your goal can be short-term, medium-term, or long-term. There are several mutual fund options for various investment objectives. Select the one based on your investment goals and horizons.
Myth 2: Mutual Funds are only for experts
Fact: Mutual Funds are managed professionally. With the help of their team, the fund managers conduct advanced market research and take decisions when it comes to investing. You need not be a market expert in investing in Mutual Funds.
Myth 3: Mutual Investments is as risky as investing in Stocks
Fact: The fund manager invests your fund in equities, debt, fixed income, gold, and money market. You can choose to invest in any combination based on your goals and risk appetite.
Myth 4: You need big amounts to invest in Mutual Funds
Fact: You can start a monthly SIP with an investment as low as Rs. 500, and there is no upper limit. Mutual Funds are about diversifying your funds across several markets. Periodic amounts on a long term basis can help you create a significant corpus for life.
Myth 5: Funds with lower NAVs are preferable
Fact: This is a popular misconception about Mutual Funds. NAV is the market value of the underlying assets. Any capital appreciation will depend on the price of the underlying assets. Rather than comparing the NAVs of multiple mutual funds, it is advisable to compare the NAV of the same fund between two dates to give you an idea of how the fund has performed.
Myth 6: You need a Demat account for Mutual Funds
Fact: Holding a Demat account is entirely optional except for the cases of Exchange-traded funds. You do not require a Demat account for Mutual Funds otherwise.
Myth 7: Past Performance of the Fund plays a significant role
Fact: While it’s true that a fund’s past performance plays a role, it is not the only parameter for selecting a Mutual Fund. As the economic conditions are constantly changing, it’s better to look at the reasons for the Mutual fund’s performance, underlying assets, and fund manager’s expertise.
It is essential to clear all myths and skepticism before investing to make a well-informed decision. We hope that we have steer cleared of some myths so that you can start your investment journey confidently.