Myths and Facts about investing in Mutual Funds

Myth 1: Mutual Funds are just for long-term investing 

Fact: you'll do goal-based investing in mutual funds. Your goal tenure are often short-term, medium-term or long-term. Mutual funds have different schemes around various investment objectives and horizons. you'll also invest in mutual funds for ultra-short goals (ultra-short debt funds) or emergency corpus creation (liquid funds). 

Myth 2: Mutual funds are for experts 

Fact: Mutual funds are professionally managed. The fund manager conducts advanced marketing research and makes necessary decisions associated with the investments within the fund. Therefore, you would like not be a market expert in investing in mutual funds. 

Myth 3: Investing in mutual funds is that the same as investing in stocks 

Fact: Mutual funds invest in equities and debt, fixed income, gold, and market instruments. you'll invest in any of those assets or a mixture of them through mutual funds, supported your goals, tenure and risk appetite. 

Myth 4: Mutual funds with a lower NAV are better 

Fact: The NAV or Net Asset Value of a open-end fund is that the total market value of its underlying assets instead of its market price. In simple terms, the difference during a fund’s NAV between the 2 dates would indicate how that fund has performed during that period. Comparing the NAV itself thereto of other funds won't be helpful. Therefore, considering the NAV comparison of open-end fund s are often irrelevant while choosing a mutual fund. 

Myth 5: you would like an outsized amount of cash to take a position in mutual funds 

Fact: Your single open-end fund SIP (Systematic Investment Plan) investment are often as low as 500. Another striking feature of mutual funds investing is snackable and regular investing. Therefore, you'll start with just a SIP of 500 or a payment of 5000 (1000 subsequent payment additions) with no upper limit. 

Myth 6: you would like a Demat account for open-end fund investing 

Fact: you simply need a Demat account for investing in an ETF (Exchange-Traded Fund). you'll also need it if you would like to carry any open-end fund in Demat mode. you are doing not need a Demat account for investing in mutual funds otherwise. 

Myth 7: Mutual funds give guaranteed returns 

Fact: Returns in mutual funds are subject to their asset and risk profile. Mutual funds being a basket of assets whose returns are linked to the worth of the underlying assets and should vary from time to time. Therefore, mutual funds cannot give guaranteed returns. 

Myth 8: you ought to select a scheme with the simplest past performance 

Fact: you ought to not consider past performance only as a parameter for future performance. this is often because the markets and economic conditions keep changing. Therefore, it's better to seem at the explanations for the fund’s performance, its underlying assets and therefore the fund manager’s experience before investing.