There are certain myths which depicts the quixotic picture about investing in mutual fund. Investors need to have a proper understanding for a painless investment. It is always important that you blind your own opinions based on the information and knowledge that you get.In this article, loansninsurances.com takes the opportunity to resolve the most common myths related to investment in mutual funds.
You need a large amount to invest in mutual funds!
It is a common perception that you need a large amount to invest in mutual fund but, this is a wrong perception. This is one of the most long standing myths which have no value in this present day. Most mutual funds today facilitate investments of as low as Rs. 1000, with no limits on the maximum amount. For Equity linked savings schemes the amount is as low as Rs. 500 through SIP and the amount can be increased gradually. If you have a small surplus today , then take a step forward to invest because a regular investment can give you a huge corpus over time.
Mutual funds are for experts
When someone tells about Mutual Funds, it is everything that goes above your head and you assume that only experts in finance can understand how they work. It is a paradox that you need to be an expert to invest in mutual fund. Unlike the equity market, you don’t have to take the call on when to buy or sell shares, the fund manager professionals will take care of everything i.e the research and analysis. He will take the right decisions of where to invest and how to invest. So in actuality, an experienced mutual fund advisor can suggest you to choose the right scheme thats fits your risk profile and is relevant for your financial goal & long time investment.
Mutual Fund Investment only in equity product!
People usually associate Mutual Funds with Equity Funds, but this is not entirely true. If this thing has repeatedly keep you aloof from investing in mutual funds, then you should make yourself knowledgeable that 66% of the assets under management of mutual funds are in debt mutual funds and equity mutual funds just make up the other 32% of the market. Within debt mutual funds you can invest in debt instruments that mature in a day (also known as Money Market Instruments) to those that mature in 1 or even 10 years.
Mutual funds are for long loan term investors!
When there is a long term investment then there is always an extra advantage but that doesn’t mean that Mutual Funds are only for such investors. In fact, there are various short-term schemes where you can invest from a day to a few weeks.
Buying a top-rated mutual-fund scheme ensures better returns!
Mutual fund ratings are dynamic and based on performance of the fund over time. So, a fund that is rated highly today, may not necessarily maintain its rating a year later. A five-star fund could become a three-star or two-star fund based on its risk-adjusted performance and volatility of its risk. Investments in mutual funds need to be tracked with respect to its benchmark to evaluate its performance to stay invested or exit.
You need a demat account to invest in mutual funds.
You do not need a demat account when investing in mutual funds. There are multiple ways in which you can buy Mutual Funds, such as :
1) Offline: By filling up a form through financial intermediaries like independent financial advisors, banks, financial distribution houses etc.
2) Online: Through various distributor websites and through AMC websites.
SIPs helps not to lose money!
Systematic Investment Plan (SIP) is the best way to invest in equity funds because they reduce the risk and average out of the investment cost. Cost averaging simply means that when the market falls and NAVs come down, the SIP investor buys more mutual fund units and when the markets are up, the investor buys fewer units. Therefore, a realistic approach can bring down the risk that you are willing to take by investing in equity funds, whether it is lump sum amount or a huge one.
(Courtesy: The Economic Times, Associations of Mutual Funds in India)