List of common myths about mutual funds you should avoid
A mutual fund (MF) is an effective financial vehicle suitable for almost every investor type. It’s an excellent way to invest for accomplishing your future goals – save for retirement, buying property, planning children’s education, etc. Moreover, MFs are getting increasingly popular in the country.
But as with anything popular, there are several investment-linked misconceptions surrounding MFs. These might confuse, mislead or even scare you about MF investments. So, it’s important to debunk them to make informed decisions.
Here is a list of common myths about mutual funds that you should stay away from.
Mutual fund investments = Guaranteed returns
While MF schemes can earn you considerable returns, there is no guarantee for the same. These funds are subject to market risks. So, market ups and downs may impact their performance. There are different MF types like equity, debt and hybrid that come with varying degrees of risk.
Remember – the higher the risk, the more the expected returns. But, you shouldn’t just choose an MF based on its promises of high returns. You must assess the previous track record of a certain scheme before investing in it.
You have to invest a huge amount in MFs
This is one of the most widespread MF-related myths. In reality, you don’t have to put a large amount of money into mutual funds for earning returns. There are schemes that allow you to start with amounts as low as Rs.100.
You can choose to invest through a Systematic Investment Plan (SIP) to build wealth in a disciplined manner. Or you can invest a lump-sum amount. Also, there is no maximum limit to the investment.
MFs are solely meant for long-term investments
There is a wrong impression that MFs are only long-term investments. It’s true that staying invested for a longer period will offer you compounding benefits. Still, it’s not mandatory.
You can find numerous mutual funds online with different maturities and horizons for meeting your short-term, long-term and mid-term goals. For instance, you can opt for short-term liquid or debt funds while planning a vacation in near future.
You have to be an expert to buy an MF scheme
This myth is untrue because MFs are designed for common investors. You can invest in them even if you have minimal knowledge of the securities market. The Asset Management Company (AMC) appoints fund managers who actively oversee the MFs. These expert professionals carefully allocate investors’ money in multiple securities. They continuously analyse market trends and try to generate profits so you don’t have to.
Now that you’re aware of the common myths, don’t let any of these stop you from investing in mutual funds. They’re a great means of investment that offer flexibility, liquidity and accessibility. In fact, you can begin investing in MFs digitally with just a few taps on your smartphone with apps like the moneyfy app.