Mutual funds are surely the best of the both worlds when it comes to aggravating your wealth and diversifying your portfolio. Unlike stock markets, investing in mutual funds isn’t a rocket science, as there’s no complex computations involved. This investment avenue is ideal for all types of investors irrespective of their income.
As per the latest stats, only 1-2 percent of Indians have invested in mutual funds. Since every market goes through some sort of turmoil every so often, this class of funds endure through the same. This is mostly because of the myths and rumors disseminated by the investors over the years.
So, below we share with you 5 common mutual fund myths that investors shouldn’t believe anymore:
Should be affluent to invest: A lot of investors have this myth that to invest in mutual funds, they need to have plenty of cash with them. The good news is you don’t need to splurge more money from your pocket to start your mutual fund. Instead of going for a lump sum, you can go for a SIP that requires as little as INR 500. So, the misconception of needing more money to invest in mutual funds has to be off your checklist.
Having a DEMAT account is obligatory: If you are a first-time investor in mutual funds, then all you have to do is submit your KYC documents and get it verified. There’s no obligation to have a DEMAT account to invest or store the units after buying them. You can go for physical form as well. But finish the KYC process after your application submission.
Invest in only schemes attaining substantial gains: This is another myth where most of the investors stuck at. The fund that’s performing extremely well may not deliver the same results in the future. There are no guaranteed returns in mutual funds. However, the returns generated by the mutual funds are going high, and it happens only if you stay for long-term. This myth could possibly make you take erroneous decisions. So, instead of going by the book, just know your needs and invest accordingly to fulfill them.
Only long-term investors should invest: There’s no denying the fact that mutual funds generate substantial returns if they're held for a long period. But the good part with this avenue is that – there are options for every type of investor. Whether you want to invest for short-term/long-term, these funds have every option that aid you in meeting your requirements. Some of the examples of short-term funds are dynamic bond funds, liquid funds, etc.
Lower NAV funds are not good: Generally, when you buy a fund, you are buying at its current NAV price. The NAV value differs constantly as well. Now, just because you bought the mutual fund units at a lower NAV, you aren’t investing in cheap funds. As your holding period continues, the NAV also surges subsequently. The longer the holding period, the higher the NAV.