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Myths vs Facts about Mutual Funds

Mutual funds have recently emerged as the preferred investment vehicle for all types of investors, from novices to seasoned investors. Mutual funds, which are managed by fund managers that invest on your behalf and are thought of as a safer investment than pure stocks, take care of the duty of choosing the finest stock pool. However, mutual funds, which are thought of as rather solid investments because purchasing them entails purchasing a collection of equities as a whole, are shrouded in rumours. These may lead to incorrect deductions and lost investment possibilities. Therefore, it is essential that some of these be disproved before investing.

 

Myth 1: Mutual funds are only for professionals

The general consensus is that you can only invest in mutual funds successfully if you have a working knowledge of the markets; otherwise, you risk losing money.

 

Reality: A fund manager makes investments on your behalf when you put money into mutual funds. The managers of mutual funds are quite knowledgeable about the financial markets and how to invest money to give investors the best possible returns. Before investing your money, he or she conducts all necessary study and analysis with the assistance of his or her research team.

 

Therefore, mutual funds are the best option if you wish to invest in market-linked items but lack market knowledge.

 

Myth 2: Mutual funds are used to invest for the long term.

Reality: Your investment in mutual funds could be goal-based. Whether you choose a short-term, long-term, or medium-term target, you are probably going to make some respectable returns. Mutual funds are a collection of diverse programmes that deal with a variety of horizons and aims. Mutual funds are regarded as suitable investment vehicles for achieving extremely short-term investing objectives (ultra-short goals). Debt funds are how they are represented. You'll also see that many investors have a strong interest in mutual funds with the aim of building emergency cash.

 

Myth 3: To invest, you need a lot of money.

It's a common misconception that you must always invest in a flat sum to invest in mutual funds. As a result, inexperienced investors cannot afford to buy mutual funds.

 

Reality: You can invest a fixed amount in mutual funds through a SIP each month. This amount can be as little as 500 rupees. After that, you can add more money to your investment as and when your income rises.

 

Myth 4: Investing in mutual funds is the same as investing in stocks.

Reality: Mutual funds include a variety of investments' standard assets. As a result, gold, money market instruments, fixed-income products, debt and equity are all possible investments for the top mutual funds in India. Your investment in a mutual fund can consist of one or more of these assets. What you invest in mostly relies on your risk tolerance, financial goals, preferred tenures, etc.

 

Myth 5: Debt is better than equity.

Reality: Both debt funds and equity funds have their advantages and disadvantages, but comparing them would be unfair because they perform distinct functions—for example, debt funds protect investors from market declines. Equity funds, on the other hand, are reputed to offer superior returns.

 

Depending on your particular circumstances, you may discover that debt or equity funds better serve your financial strategy. But first, fully comprehend both mutual funds and determine which one best fits your needs.

 

Myth 6: Low net asset value mutual funds are a good idea.

Reality: The NAV, or net asset value, is the total value of the underlying assets that comprise the fund, whether you invest in large-cap or small-cap mutual funds. Not the market price, but the market worth. The success of a mutual fund is revealed by the NAV difference between two different time periods. As a result, choosing a mutual fund cannot be influenced by comparing the NAVs of other mutual funds.

 

5 Mutual Funds Myths you should know | MF Myths Busted | Mutual Funds for Beginners India

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