One of the greatest ways to invest in the stock market is through mutual funds, according to many. Nonetheless, a lot of people could be wary about making an investment in them. A primary cause of this reluctance is the numerous misconceptions that investors now have about mutual funds. Periodically dispelling these fallacies is crucial because they keep investors from taking advantage of mutual funds’ potential to generate long-term profit. Today we will try to debunk the top mutual fund myths that will really shock you.
Top mutual fund myths
Here are the top mutual fund myths that are widely popular in the world;
You need a lot of money
One of the biggest myths regarding mutual funds is that investing in them requires a sizable quantity of wealth. That being said, this is just untrue. The lowest initial lump sum investment required could be as little as ₹5,000, depending on the fund.The minimal investment is much smaller for Systematic Investment Plans (SIP). A mutual fund SIP can be started with as little as ₹500 (or even less) per month.
You need an expert to invest in mutual fund
This is a prevalent misconception among investors regarding mutual funds that many fall victim to. Thankfully, this is likewise inaccurate. A skilled group of fund managers actively manages the majority of mutual funds, making investment decisions in response to changes in the market. Thus, you can invest in such well-managed mutual funds without any worry, even if you’re new to the stock market.
Mutual fund means guaranteed returns
Generally speaking, mutual funds don’t guarantee returns. This is so because the majority of mutual funds make investments in securities that are related to the market, like equity shares, whose value is mostly determined by changes in the market. Nevertheless, compared to equity funds, which primarily invest in the equity market, debt funds. It allocates a far smaller percentage of their money to equity. It might provide more consistent returns. On the other hand, in the long run, equities funds could provide returns that exceed inflation.
You need a demat account for mutual fund investments
While having a demat account is recommended, it is not a need in order to invest in mutual funds. You can physically invest in mutual funds through a number of Asset Management Companies (AMCs) and fund houses without a demat account. In these situations, you receive a physical certificate detailing the investments you have made in mutual funds.
Mutual funds are only for long term
A misconception regarding mutual funds is that they are just appropriate for long-term investments. Although long-term investments are advised by financial professionals, not all funds are structured in this manner. You can invest in a variety of short- and medium-term mutual funds. As the name suggests, overnight funds have incredibly short investment terms. In truth, there are other types of funds.
