Sign In

Mutual Fund Myths Busted with Facts

If we were to conduct a survey and ask people about their goals, most of them are likely to revolve around a secure financial future. The way to achieve this goal is by investing right. However, this area is filled with many myths as investors are vulnerable.

Information can make us less vulnerable, and here we are busting some of the common myths about mutual funds:

Myth 1: High Capital Requirement For Investing In Mutual Funds

Fact: SIP can be started at as low as Rs.500 a month

Mutual funds offer both lump sum and SIP modes. The best thing about SIP is that an investor with even low savings can now access the stock and debt market. With a minimum investment of Rs.500, it is accessible to everyone. Hence, no high capital is required to invest in Mutual Funds. They are a simple form of investment where periodic investing can bring many benefits.

Myth 2: Mutual Funds Are For Experts

Fact: Fund managers are the experienced professionals, and an investor is only an investor.

A mutual fund is one of the few investments where you only need to decide your risk appetite and financial goal and, based on that, the right mutual fund scheme for you; the fund manager can take care of the rest. If your goal is a low risk and you choose a fund to match it, the stocks to be invested in, the allocation percentage, and the shuffling among stocks will all be taken care of by the fund manager.

Myth 3: Mutual Funds Are Not Meant For Young Investors

Fact: It is for all age groups

When it comes to investing, the younger you start, the longer you have for your investments to grow. In fact, even children can invest in Mutual Funds through their guardians. Mutual funds are an excellent option for young investors who, due to lack of experience, can burn their fingers in other investments. Also, it does not require a high amount of investment, making it feasible for first-time investors who tend to have limited resources.

Myth 4: Returns Are Guaranteed Through Mutual Fund Investments

Fact: Mutual Fund returns are not guaranteed

Every mutual fund advertisement clearly says that ‘Mutual fund investment are subject to market risks’, read all scheme related documents carefully. The risks could be owing to the fluctuations in the market. Hence, there are no guaranteed returns through mutual fund investment. However, periodic investing via SIP route can bring investors the benefit of rupee cost averaging.

Myth 5: Buying A Popular Mutual Fund Ensures Better Returns

Fact: Mutual Fund rating is dynamic

A popular mutual fund can provide a perspective on how a fund will behave in a specific economic environment. However, investors must consider, the risk-adjusted returns and look at other metrics; one of them is to compare the mutual fund return to the scheme benchmark and evaluate it periodically to decide whether to stay invested or exit. A popular mutual fund can be a good starting point but cannot substitute periodic monitoring.

Myth 6: Mutual Funds Have A Lock-In Period

Fact: Not all mutual funds have a lock-in period

Equity-linked saving schemes and retirement funds are mutual funds schemes that have a lock-in period. Equity -linked saving schemes have a lock-in period of 3 years, whereas retirement funds have a lock in period of 5 years. Many mutual funds offer liquidity and flexibility to investors. However, the very design of a mutual fund product is targeted towards capital protection or wealth creation depending on Equity Oriented or Debt Mutual Fund schemes.

Myth 7: The Higher, The Nav Of The Scheme, Has Reached Its Peak

Fact: NAV is the per-unit price and does not indicate the progress of the scheme​

The Net Asset Value (NAV) is simply the per unit price. It is for an investor to understand how many units would be allocated for an X amount. Moreover, it is volatile as the markets fluctuate.

Myth 8: Mutual Funds Are Only Suitable For Long-Term Investments

Fact: Investor has the option to choose the tenure

Since mutual funds invest in stock or debt instruments or a mix of both, staying invested long-term helps in wealth creation. However, if an investor needs liquidity, then he can invest accordingly. An investor can choose between short-term, mid-term and long-term investments.

Myth 9: Higher past returns ensure future achievement

Fact: Past returns only provide insights

Past higher returns are only indicative and do not guarantee future achievement. The financial market is volatile, and hence, investing in it should be carefully thought of. Just because a fund has shown higher returns in the past, it does not guarantee it will consistently do so. Past performance must be evaluated based on all the factors and wisely considered.

Myth 10: KYC Is Required Every Time During Investments In Mutual Funds

Fact: KYC is a centralized process

Know Your Customer (KYC) is an important process of investing in Mutual Funds. It is required to prevent money laundering and financial terrorism. It is mandatory for a first-time investor. But, once the KYC is done for the investor, the database is shared by Central KYC Registry with other financial institutions and updated to allow an investor a hassle-free experience. Hence, KYC does not have to be done every time an investor would like to invest.

Myth 11: Financial Planning Is A One-Time Activity

Fact: Financial Planning is a continuous process

Financial planning is dependent on various factors that are constantly changing. Hence, a financial plan requires review to ensure that it is in line with the set goals or if any revisions are needed. Take, for example, the Covid period; many financial plans had to be relooked at; hence, financial planning is subject to external factors and investors’ income and circumstances.

Myth 12: Professional Experts Handle My Funds, So No Need To Review My Mutual Fund Portfolio

Fact: It is your money, and hence, you must be aware

Experienced Professionals are indeed investing your money as per the fund objectives. However, a periodic review is necessary to understand if your total investment is taking shape as envisaged. You own the money, and hence, you also own the risks. So a periodic review is necessary to foresee any troubles and take a de route.

Conclusion

Mutual fund investment is not rocket science; however, understanding basic terminologies and concepts is inevitable to start investing. The only way to give the mutual fund myths a miss is by reading and researching from reliable sources, establishing the truth based on data, understanding all factors and drawing conclusions.

​
Disclaimer:
This is an investor education and awareness initiative by Nippon India Mutual Fund.
Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/ Market Infrastructure Institutions'. For redressal of your complaints, you may please visit www.scores.gov.in . For more info on KYC, change in various details & redressal of complaints, visit mf.nipponindiaim.com/investoreducation/what-to-know-when-investing This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document. Language Disclaimer:
While utmost care has been taken in translating the article into respective regional language(s), in case of any confusion or difference of opinion, article available in English language should be deemed as final. The article provided herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional advice for the readers. The document has been prepared on the basis of publicly available data/ information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of loss of profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this article. "ABOVE ILLUSTRATIONS ARE ONLY FOR UNDERSTANDING, IT IS NOT DIRECTLY OR INDIRECTLY RELATED TO THE PERFORMANCE OF ANY SCHEME OF NIMF. THE VIEWS EXPRESSED HEREIN CONSTITUTE ONLY THE OPINIONS AND DO NOT CONSTITUTE ANY GUIDELINES OR RECOMMENDATION ON ANY COURSE OF ACTION TO BE FOLLOWED BY THE READER. THIS INFORMATION IS MEANT FOR GENERAL READING PURPOSES ONLY AND IS NOT MEANT TO SERVE AS A PROFESSIONAL GUIDE FOR THE READERS."

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
  • CONNECT WITH US
Top