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Mutual funds are the best of both worlds for compounding your wealth and diversifying your portfolio. Unlike stock markets, investing in mutual funds is not rocket science, as there are no complex calculations involved. This way of investing is suitable for all types of investors irrespective of their income.
As per recent statistics, only 1-2 percent of Indians invest in mutual funds. As every market goes through some kind of turbulence every now and then, this part of the currency is similarly resilient. This is mostly due to the myths and rumors that have been spread by the investors for years.
So, below we share with you 5 mutual fund myths that investors should not believe.
Must be rich to invest: Many investors have a myth that they need to have a lot of cash with them to invest in mutual funds. The good news is that you don’t need to spend any extra money out of pocket to start your mutual fund. Instead of going for a lump sum, you can go for a SIP that charges 500 INR. So, the misconception of needing extra money to invest in mutual funds should be crossed off your checklist.
Holding a DEMAT account is mandatory: If you are a first-time investor in a mutual fund, all you have to do is submit and verify your KYC documents. There is no obligation to have a DEMAT account for investment or savings after buying the units. You can also go to the physical form. But after applying, complete the KYC process.
Invest only in high yielding schemes: This is another myth that most investors are stuck with. A fund that is performing very well may not perform the same in the future. There are no guaranteed returns in mutual funds. However, the returns generated by mutual funds are going high, and only if you hang around for a long time. This myth may cause you to take wrong decisions. So, instead of going by the book, just know your needs and invest accordingly to fulfill them.
Only long term investors should invest in: There is no denying the fact that mutual funds can generate huge returns if held for long periods of time. But the good part about this approach – there are options for every type of investor. Whether you want to invest for short term/long term, these funds have all the options to suit your needs. Some examples of short-term funds are variable bond funds, liquid funds, etc.
Lower NAV funds are not good. Generally, when you buy a fund, you are buying at the current NAV. NAV value varies from time to time. Now, since you bought mutual fund units at low NAV, you are not investing in cheap funds. As your tenure continues, the NAV will also increase. The longer the tenure, the higher the NAV.
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