It’s Time to Shatter the Myths Around Mutual Funds

Last Updated : June 3, 2016, 11:44 a.m.

Myth 1: Mutual Funds are only for the experts

Fact: When it comes to mutual funds, everything will go above your head, and only experts belong to finance industry can understand how things work in mutual funds. Well, this absolutely not the case! Unlike equity market, there is no need to take the call regarding the buying or selling of shares as the fund manager will do it for you. He is the one who will help you to decide, where you need to invest the money. So, even if you are not a financial expert, you still have the access to someone who will help you in making the right decision.
Myth 2: Mutual funds are for the long-term only
Fact: This is absolutely not right because there are many short-term schemes available in mutual funds, wherein you can start investing from a day to a few months. Yes, it is also true that investing in long-term mutual funds has more advantages, but it does not mean that mutual funds are only for long-term investors.

Myth 3: Mutual Fund is known as an equity product

Fact: However, people generally associate mutual funds with equity funds, but this is not true at all. Moreover, the mutual funds are invested in a wide range of instruments that ranges from debt to equity. In addition to, within the debt, you can invest in the debt instruments that mature in a day to those that mature in 1 or in fact 10 years.
Myth 4: Mutual fund having Rs. 10 NAV is better than Rs. 25 NAV

Fact: Well, it would not be wrong to say that this thing simply comes to a subconscious movement regarding what seems to be affordable. But, what is important is the percentage return on the invested funds. So, instead of giving the importance to a low NAV, and more number of units, it is definitely worthwhile to consider other factors such as performance track record, fund management along with the volatility that actually determine the return on the portfolio.

Myth 5: You need to have a big Sum to invest in Mutual Funds

Fact: It is no doubt of the most common myths which absolutely have no value today. Yes, because many funds allow you to invest the money starting as low as Rs. 1000, with no maximum limit. In fact, in case of equity linked savings schemes the amount is as low as Rs. 500. Not only this, there is no monthly or annual maintenance charges. What more you can ask. In fact, they also provide you with the SIP facility in plenty of schemes that actually allow you to invest the small amounts on a regular basis.

Myth 6: You need to have a demat account when it comes to investing in Mutual Funds

Fact: This is not at all true. There are plenty of best possible ways through which you can buy mutual funds. Few of them are:

Offline: With the help of filling up a form through financial intermediaries such as independent mutual fund advisor, financial distribution houses, banks etc.
Online: With the help of numerous accessible distributor websites or through AMC websites.

However, in case if you have a demat account, you can consolidate the mutual fund holdings along with others in the demat account. In fact, you can easily buy the mutual funds with the same intermediary that helps you in buying and selling the shares on exchange.

Myth 7: Mutual Funds with higher NAV have reached the peak

Fact: It is also a very common misconception due to the general association of mutual funds with share. But, one thing that needs to be mentioned here is the fact that mutual funds invest in shares, hence they can any time get in and out. Moreover, if the fund manager feels that stocks have reached at highest, he always has the option to sell it. In order to understand the truth behind this myth, you first need to understand that NAV is nothing but a reflection of the market value of the shares.