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10 Common Myths about Mutual Fund Investment

In the last few years, the mutual fund has made a good position in the hearts of investors. The mutual funds are gaining popularity amongst people with different earning capacities and varied risk-taking capacities. There are so many different websites who give offers to buy mutual funds online and claim different USP’s of their services. Although, there are many myths and misunderstandings standing in the way of many people who wants to invest in mutual funds.

  1. Huge capital investment is required

The biggest myth of all about mutual funds is that you need a large amount of money to start investing in mutual funds. This is not true, you can start an investment with a very small amount like only Rs. 500 in mutual funds like SIP and you can increase your monthly investment capital, according to the increase in your income.

  1. Mutual funds are risk-free

This is a common myth in many people that the mutual fund investment is a risk-free type of investment, many investors start investing in mutual funds because of this myth. Although there is always a disclaimer before you sign up for any mutual fund investment that how much risk your funds will be facing in the future.

  1. Demat is a must

Although it is a good option to have a Demat account it is not compulsory to have one. There are other options available to invest in mutual funds like buying the funds through fund houses or through the distributors. There are many different online services from which you can buy and redeem the funds for investments.

  1. Lower NAV will give higher returns

It is believed that only the mutual fund investments with lower NAV can provide higher and better returns as compared to higher NAV but it is not a fact. It is more dependent on the theme of your mutual fund, which decided the level of your returns, therefore the NAV is not the deciding factor for the returns.

  1. Regular monitoring is not required

Many investors believe that once they start investing in mutual funds they can just leave it to rest and simply wait for the returns to come which is one of the biggest mistakes made by them. It is very important to keep a keen eye on your investment by monitoring the market all the time in order to reduce the risk factor and enjoy better profits.

  1. History always repeats

Not only in mutual fund investment, but most of the time investors believe that once the market went into loss it can simply never recover. There are many mutual fund schemes about which people believe that they can never provide good returns just because they failed once before. This is completely false as there is no guarantee of profit or loss based on the history of the scheme, it changes accordingly time to time.

  1. Short term profits have no scope

It is of no doubt that the long-term investments will give you great returns, but it does not imply that the short-term mutual fund investments are useless. If the investor is playing his cards correctly and smartly, then it is completely possible to gain great returns through short-term investments also.

  1. Domestic markets are the limit

Many investors believe that the mutual fund investment is only limited to the domestic market but it is not true. The mutual fund can be invested in international markets also and countries like Brazil are providing great returns.

  1. Being an expert is necessary

It is just a myth that you need to be an expert investor to start investing in mutual funds, In Fact, mutual funds are a great source of investment for the beginners without any expert knowledge.

  1. The tax deduction is easy

Many distributors and fund schemes say that the tax deduction is their biggest USP and many investors starts investing in mutual funds mainly so that they can deduce their tax but it is not compulsory that it will happen. These investments to provide some tax benefits but may not be able to help you in lowering your tax very effectively.

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