While we know that Mutual Fund is the most diversified, liquid and professionally managed financial investment option, there are still some myths around it that generates doubt and holds us back from investing.
It’s okay to have doubts, but if they are refraining you from making the right decision, it’s time to understand Mutual Funds in a better way and break the myth that surrounds it.
M U T U A L F U N D
So let’s have a look at the 6 common myths around Mutual Funds and bust them one by one.
- You need to have a Demat account to invest in mutual funds: You do not require a demat account to buy Mutual Funds. You can either go and visit the Asset Management Companies (AMC) websites or buy it directly through online distributors it’s as simple as that.
- You need a lot of money to invest in mutual funds: All that you need to start investing in Mutual Funds is an amount as less as ₹100 in SIP and ₹5000 if you want to invest in lump sum. You don’t have to be rich to invest in Mutual Funds. With easy SIP methods you can start investing from your pocket money while you are in your college.
- Mutual funds are long term investments: Though we know that the longer we stay invested the more we can earn and gain from the markets, but it does not mean that Mutual Funds only are for long term only. You can invest for a short, medium or long term depending upon your requirements and your investment ability.
- You need to be an expert to invest in mutual funds: Yes you need some understanding of investments and various investing options but it does not mean you need to be an expert to invest in the Mutual Fund though some knowledge is always to your advantage. The best part about Mutual Fund is that you have a professional Fund Manager who is managing your money for you. You just need to select the funds that you want to invest in depending upon your risk appetite and your tenure and the rest of the work is taken care by the Fund Manager.
- Only top rated mutual funds ensure good returns: Though top rated funds are a good step too short list schemes to invest in, it does not mean that it’s the only way to select a Mutual Fund to invest in. The performance of a Mutual Fund depends on many factors like who is the Fund Manager, what is its Expense Ratio, what is the Asset Under Management (AUM) and the Sharpe Ratio. These factors can change anytime due to varied reasons and impact the performance of Mutual Funds positively or negatively, so you need to choose wisely and not just follow the heard.
- Mutual funds ensure guaranteed returns: While Mutual Funds have the capability to generate good returns, they are still a market linked instruments and like any other investment options, Mutual Funds also come with their own risks. Since Mutual Funds are market linked specially the equity funds, their performance highly depends on the performance of the stock market which can move in any direction up or down.
Mutual Fund Myths Busted
Now that we have understood Mutual Funds, it’s time for us to start investing in them without much apprehension. You can read my blog Planning to invest in Mutual Funds? Here is how you can pick the right one- Be a wise investor which throws light on various parameters of choosing the right Mutual Fund to invest in.
Disclaimer: Mutual Fund investment is subject to market risk. This blog is to inform its readers and by no means indicates that Mutual Funds are risk free. Invest wisely.