Myths and Facts about investing in Mutual Funds - Part I

 Myth 1 : Investing in schemes with lower NAVs can generate gains 

Fact : internet Asset value (NAV) is just the worth at which a unit of particular scheme are often bought or sold. So, investing in schemes having a NAV of Rs. 50 or Rs. 500 is not any where associated with the gains you'll expect from your investments. a number of the factors which will be considered are rate of return , the performance and volatility of the scheme, etc to call a couple of . 

Myth 2 : If a fund announces dividend, then it's an honest time to shop for . 

Fact : Dividends are announced supported the excess profit collected by the fund from its holdings. This surplus profit is retained within the fund until it's paid bent the unit holders and reflects within the NAV of the scheme. When the dividend is paid out, the NAV drops reflecting that change. Hence, investors don’t gain anything by timing the acquisition . 

Myth 3: Sell when the NAV is high and invest in schemes with low NAVs 

Fact : once you buy a share, you track the share price and sell when it rises to a particular level above the acquisition price. open-end fund schemes invests the quantity collected by the investors in shares The NAV of a open-end fund is that the value of the scheme’s assets minus its liabilities, divided by the entire number of units. A high NAV doesn't mean that the fund will offer great returns and neither does a coffee NAV means otherwise. 

Myth 4 : open-end fund investments are all about timing 

Facts : Most investors fall for this. Attempts to time market are met with disasters and investors are usually advised against it. Investors may choose Systematic Investment Plan (SIP) or a scientific Transfer Plan (STP) and aim to profit from the Rupee Cost Averaging of your investment.