You need to be a millionaire to invest in mutual funds! Or, mutual funds guarantee returns to all their investors. You have probably heard these myths about mutual funds every now and then.
It’s time to debunk these myths and find out what are the true facts behind mutual funds and their investments!
Myths about mutual funds
1. Mutual funds are only for long-term investment
Your investment in mutual funds could be goal-based. Whether you select a short-term, long-term, or medium-term target, you are probably going to make some respectable returns.
Mutual funds are regarded as suitable investment tools for exceedingly short-term investing objectives (ultra-short goals). Debt funds are how they are represented.
You’ll also find that many investors have a strong interest in mutual funds with the aim of building emergency cash.
2. You need an agent to understand mutual funds
The finest mutual funds to invest in are based on much the same information investors have about stocks, so this could not be more different from the truth.
While it is true that investment managers work for mutual funds, as an investor you may conduct your own research on firm stocks and request that certain stocks be included in a fund of your choosing.
3. Mutual funds are similar to stock investment
Numerous investment-related assets are included in mutual funds. As a result, gold, money market products, fixed deposits, debt and equity are all potential investments for the best mutual funds in India.
Your contribution to a mutual fund can include any or all of these assets. What you invest in mostly relies on your tolerance for risk, financial goals, preferred tenures, etc.
4. Mutual funds that have low net asset value are the only which are good
The NAV, or net asset value, is the entire value of the underlying assets that comprise the fund, whether you invest in huge or tiny mutual funds. Not the market price, but the market worth.
The success of a mutual fund is revealed by the Value change between two different time periods. As a conclusion, selecting a mutual fund cannot be affected by comparing the NAVs of other mutual funds
5. Mutual funds guarantee higher returns
The investment characteristics of mutual funds determine the profits you will receive. Mutual funds are collections of assets, whose returns depend on the value of their underlying assets.
These might occasionally be subject to variations. As a result, returns might not be fixed or promised.
6. Only people having demat account can go for mutual funds
Apart from the Exchange Traded Funds, keeping mutual fund units in Demat form is entirely optional.
The decision on whether to hold the units in a Demat mode or the existing traditional accountant account mode is fully up to the investor in all other plans, along with the close-ended listed strategies like Fixed Maturity Plans (FMPs)
Types of mutual funds
- Money market funds have comparatively less risk. They are only permitted by law to invest in a limited group of high-quality, brief securities issued by American businesses and national, state, and municipal governments.
- Bond funds have bigger risks than money market mutual funds as their primary objective is to generate better returns. The risk and benefits of bond funds can differ tremendously due to the wide range of bonds.
- Stock funds purchase corporation shares. Stock funds vary widely from one another.
- Growth stocks concentrate on equities with the possibility for above-average investment rewards but they may not consistently pay a dividend.
- Revenue equities are purchased by income funds.
- A specific market index, such as the Standard & Poor’s 500 Index, is tracked by index funds.
- Target date funds mix your investments across stocks, bonds, and other assets. The composition regularly shifts over time in accordance with the fund’s strategy. Lifecycle funds sometimes referred to as target date funds are created for those who have certain pension plans in view.
Conclusion:
Myths about mutual funds can be common and misleading! Get to know about mutual funds more in detail and invest. When you understand mutual funds better, you can put your money to better work.
Consult an expert advisor to get the right plan
FAQ
What’s the biggest problem with mutual funds?
- High expense ratio
- High sale charges
- Management abuse
- Tax inefficiency
- Poor trade execution
Can we trust mutual funds?
Mutual funds are easy and trustable if you can understand them. Investors don’t need to worry about short-term fluctuation and about risks.
Are mutual funds really beneficial?
There are too many benefits of mutual funds. Mutual funds merge the funds of many different participants and handle them as one large financial pot. Therefore, expert fund managers handle the selection of stocks and bonds for investors rather than the investors themselves.
