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.
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