Myths Vs. Facts about Mutual Funds
As Indians, saving is inherent to your nature. However, despite understanding the importance of saving and investment, the penetration of mutual funds in India is low. One of the prime reasons for this is the lack of awareness and the several myths surrounding mutual fund investments. It is important to quell myths about mutual funds online and invest wisely.
Here are some of the most common myths and facts about mutual funds:
| Myth | Fact |
| Mutual funds require a large investment. | Mutual funds are a scheme where you can begin investing with as low as Rs. 500 per month. You can choose to invest in a lump sum or opt for the SIP (Systematic Investment Plan), where you invest a fixed sum over a period at regular intervals. You can increase your investment over time. SIPs give you the benefit of the power of compounding. The sooner you begin investing, the more wealth you can accumulate. |
| Mutual funds are for experts. | Mutual funds are ideal for investors who do not have the necessary knowledge, time, and skillset to invest in the market. Mutual funds online are managed by professional fund managers after extensive research for the benefit of the investor. You can choose a fund that best aligns with your risk tolerance. |
| Mutual funds are risky investments. | Mutual funds online allow you to invest as per your risk tolerance. If you are a high-risk investor, you can invest in equity mutual funds online. However, if you are a low-risk investor, you can opt for debt mutual funds and create a fixed income stream. You can also invest in balanced mutual funds, which offer a combination of equity and debt investments. |
| Give up mutual funds during market volatility. | On the contrary, investors must stay invested in their mutual fund schemes even during market volatility. SIP investments over a long period give you the benefit of rupee cost averaging, minimizing your costs, and maximizing your returns. |
| Invest in mutual funds online with a low NAV (Net Asset Value) | Usually, investors relate high NAV with high returns, whereas the functioning is the opposite. NAV is the asset value of your mutual fund, and the value increases or decreases as per the fund’s performance. NAV does not impact the future returns; portfolio composition does. A mutual fund online with Rs. 10 NAV can generate similar returns as a scheme with Rs. 100 NAV. You should invest in mutual funds online based on their investment composition, past performance, expense ratio, fund manager experience, etc. |
| You need a Demat account to invest in mutual funds online | You can invest in mutual funds online even if you do not have a Demat account. In this case, you can buy mutual funds directly from the fund house or through an authorized distributor. |
| Investing in a top-ranked mutual fund online guarantees high returns. | Mutual funds are dynamic, and their performance varies over time, subject to market fluctuations. A mutual funds scheme currently at the top of the charts might not be high rated after a month or later. Even though rank is one of the first criteria to shortlist a mutual fund scheme, the ultimate investment decision should be based on past performance, fund manager experience, fund investment philosophy, portfolio compositions, expense ratio, etc. |
As a wise investor, it is advisable to debunk these myths and invest in mutual funds online as early as possible to benefit from the power of compounding. Use the Tata Capital Moneyfy app to start your mutual fund journey.
