With more and more Indian investors finally realising the value of mutual funds, it comes as no surprise to find India’s mutual fund industry growing at such a fast-paced rate. However, if you are planning on investing in mutual funds, there are a few things that need to be focused on. One of the biggest hurdles in investing in mutual funds is the myths surrounding them. To make sure that you are taking the right steps towards financial growth, it is very important to first be aware of all these myths.
So, take a look at some of the most common misconceptions about mutual funds:
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Myth 1: One needs to be an expert to invest in mutual funds
Sure, if you are a confident investor, it is possible to use your own knowledge and experience while buying mutual fund schemes. This way, one can avoid going through an agent or an intermediary company and save on commission charges. However, one does not have to be an expert to invest in mutual funds. Beginners can rely on mutual fund companies that have fund managers who use their expertise and market experience when it comes to allocating their money to gain good returns.
Myth 3: An investor needs to make a large investment in mutual funds
One of the most common myths is that those investing in mutual funds always need to put down a high amount. This is just not true. Mutual fund investors do not even need to make a one-time investment. Most mutual fund companies offer SIPs (Systematic Investment Plans) where one can make regular investments on a monthly basis.
Myth 4: Buying top-rated mutual funds will always guarantee high returns
While running a search for “what is mutual fund” online, or looking at a mutual fund advertisement, you are very likely to come across the message that mutual funds are subject to market risks. What this means is that a mutual fund scheme that is currently at the top of the rating chart does not necessarily guarantee better returns in the future. One needs to evaluate its performance from time to time to decide whether investing is a good option.
Myth 5: Mutual funds are only about long-term investments
Another common misconception is that mutual funds should only be looked at from a long-term perspective. While it is true that long-term investments do work for good returns, there are other mutual fund categories such as liquid funds or short-term debt too. These categories have the ability to offer better returns as compared to recurring or fixed deposits. So, if you are looking for a short-term investment plan, it is advisable to consider short-term debt funds as they can help towards earning a lump sum amount.
These are the most common misconceptions that one should always steer clear of. To know how to invest in mutual funds properly, it is important for an investor to be well informed. This is the only way that they can build a healthy mutual funds portfolio.
