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7 Myths about Mutual Funds that you must stop in your mind

Mutual fund investments are subject to market risks, read all scheme-related documents carefully. This one sentence is representing myths about mutual funds in the majority of people’s minds. Mutual Funds are based on the stock market. Considering this market risk, people don’t prefer mutual funds as an investment option. However, many other myths spread in the investment market.

Well, a mutual fund is one of the best and simple ways to invest money. Money will be professionally managed by fund managers who have conducted in-depth market research. Nevertheless, the mutual fund is also gaining momentum in today’s generation but these drawbacks are there too in the form of myths. Mutual funds are dealing wrongly in some individuals’ minds.

So, let’s clear this up today. In this blog, you will relate to folk tales on mutual funds that people are spreading in the community. Thus, here we are with the facts of those misconceptions. Check Out!

  1. Myth 1: One needs an immense amount to invest in a mutual fund

Truth: This is totally wrong conception. A person can invest with just only 100 Rs. through SIP in a mutual fund. SIP is a systematic Investment plan wherein an individual can do a regular monthly installment in the fund and generate wealth in the long-term period. The secret part is that the earlier you start to invest in SIP, the richer you can be.

 

  1. Myth 2: Mutual Funds are for market exerts, beginners can’t do

Fact: Though mutual funds are based on the market there is no need to time the market. Even, the investor doesn’t have to learn skills and knowledge to make any money decision. An individual has to just fix the amount of investment and then let the fund managers handle the money.

  1. Myth 3: It is best only for long-term

Fact: Mutual fund is goal-based investing. You can plan even for the short term to achieve your financial goals. There are numerous types of schemes where risk tolerance, securities, and tenure can be customized. Debt mutual funds are suitable for investors with short-term investment horizons.

 

  1. Myth 4: Scheme with lower NAV is better to gain high returns

Fact: NAV means Net Asset Value. A mutual fund’s NAV represents the market value of the fund’s investments and not the market price. So, choosing the stock based on a lower NAV is irrelevant. For example, you invest ₹20,000 each in scheme A whose NAV is ₹40, and scheme B (whose NAV is ₹200. You will be allotted 1,000 units of scheme A and 200 units of scheme B. Assuming that both schemes have invested their entire corpus in exactly the same stocks and in the same proportions if the underlying stocks collectively appreciate by 10%, the NAV of the two schemes should also rise by 10%, to ₹22 and ₹220, respectively. Thus, in both, the value of your investment increases to ₹ 22,000. So, now it’s clear that NAV doesn’t matter while choosing funds.

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  1. Myth 5: There will be guarantee on returns in mutual funds

Fact: Mutual funds will give high returns than fixed deposits definitely. Though, returns are not fixed or guaranteed here. Mutual funds rely on the stock market. So, it always fluctuates with the market. So, expecting fixed returns in mutual funds is the wrong perception for an investor.

  1. Myth 6: Demat account is mandatory for investment in mutual funds

Fact: Investors can even choose the physical verification option to start SIP in a mutual fund. A Demat account is not compulsory to invest in. If you are going to start investing in mutual funds for the first time, you have to complete the KYC form. After the verification, your investment will start.

 

  1. Myth 7: You are young to invest in a mutual fund

Fact: It is a wise decision to invest at an early age to build a large corpus till the retirement period. The major benefit is an investor can start investing with a small amount on monthly basis and the magic is you will create great wealth with this investment after long-term and consistent investing. So, the sooner you start, the higher fund you can build for yourself.

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Wrapping up

To put it in a nutshell, all of these myths are spreading only negativity among people and you can also be a part of these myths. However, if you want to build your wealth through systematic investment then mutual funds are the best option to start. If it is done correctly and at a young age, then nobody can stop you to make an unbelievable profit. So, decide wisely and start quickly.