Top 12 Common Myths About Mutual Fund Investments

Mutual funds are popular and practical investment options in the market. They are one of the safest ways to invest your hard-earned money to secure your future. This method has become a foolproof way, and it comes with numerous benefits, especially when your money is professionally managed. The fund managers conduct extensive market research and manage your funds with utmost responsibility. In addition, portfolio diversification makes up one of the main advantages of investing in mutual funds.

Unfortunately, mutual funds’ popularity in India attracts a lot of challenges. The most basic of all challenges is that the industry is dealing with too many myths that revolve around it. Many staggering rumors are still in the air despite it being clear to its clients. This article here is there to clear out the top 12 common myths about mutual funds investments. Read on to find the common myths, see how you relate to them, and discover the real facts side by side.

Myth 1. Mutual Funds Are Only for Experts

Real Fact: It is not a thing that only experts can invest in. A person who is not an expert in investing money in mutual funds can also invest. The reason is simple: some professionals are responsible for doing all the research and making decisions on your behalf. An investor can trust them after they choose a fund that matches their financial goals and risk levels.

Myth 2. A High NAV Means the Fund Is Too Expensive

Real Fact: No, this is not the case. It stands for Net Asset Value, which is the price per unit of a mutual fund. If it is high, it doesn’t indicate that it will not grow or is very expensive, etc. Two things matter: the growth of the fund over time and whether it is a fit for your investment plan.

Myth 3. You Need a Demat Account to Invest in Mutual Funds

Real Fact: No, it is not always necessary. There are many mutual funds where one can directly invest in using an application, website, or bank. On the other hand, specific funds, like Exchange Traded Funds (ETFs), might need a Demat account.

Myth 4. Highly Rated Mutual Funds Always Give the Best Returns

Real Fact: The future returns can never be based on past ratings of the performances of mutual funds. The mutual fund returns tend to change with time because things are not always the same in the market. So, whenever you are about to invest in mutual funds, check important factors like the fund manager’s experience, investment strategy, and current market conditions.

Myth 5. Mutual Funds Only Invest in Stocks

Real Fact: Bonds, government securities, gold, stocks, and other assets are used to invest in. So, there is no limitation of you investing in stocks only through mutual funds. Plus, many different types of mutual funds are designed for different investment needs. There are categories in which an option is safer than the others that are riskier but with the tendency of higher returns.

Myth 6. Mutual Funds Are Only for Long-Term Investments

Real Fact: No, there is no such limit. There are mutual funds for short-term needs, too. Liquid funds and ultra-short-term debt funds are solid examples of emergency savings or short-term expenses.

Myth 7. You Need a Lot of Money to Start Investing

Real Fact: The amount of money is not a concern when it comes to mutual funds. They are affordable for everyone. One can invest with a very minimal amount via a Systematic Investment Plan (SIP). People can invest ₹500 using SIPs. So, these are very suitable for beginners who want to start investing and build wealth over time.

Myth 8. Mutual Funds Guarantee Profits

Real Fact: The market’s performance keeps on changing, so by no means can mutual funds guarantee a certain amount of profit. It works with the dynamics of the market: it grows with the market rise and reduces if it goes down. For this reason, long-term investments are good options as they balance out the ups and downs of the market performance.

Myth 9. You Have to Do KYC Again for Every Investment

Real Fact: The KYC process is not necessary each time you invest in a different fund. It only needs to be done once. After you do it successfully, you are allowed to invest in multiple mutual funds without going through the entire process each time.

Myth 10. Investing in Mutual Funds Requires a Lot of Paperwork

Real Fact: Absolutely not. Everything today is managed online. Investing in mutual funds is very simple now. One needs some basic documents like ID proof, address proof, and a passport-size photo, and it’s done. There are some options where you can complete the entire process within a few minutes.

Myth 11. Mutual Funds Are Too Risky for Most People

Real Fact: Mutual funds are of both types. A person can choose the safer ones if they do not like to take any risks. There are different types of mutual funds, and some are very safe. Debt funds or balanced funds are less risky than stock market investments. So, you pick the one according to the level of risk you are ready to handle.

Myth 12. Once You Invest, You Don’t Have to Check Your Mutual Funds

Real Fact: One can not blindly invest. It is a healthy habit to keep a check on the mutual funds markets from time to time. The professionals are there to do their tasks, but the investor also has to remain vigilant in such cases. The market changes, and your financial goals may change too. If you review your investments regularly, it will help you make better financial decisions.

In a Nutshell

So, the top 12 myths that tend to create doubts in a beginner’s mind every time they think about investing are debunked. Invest in mutual funds but remain well informed. It is good to stay informed and make the best decisions about your investments.