When it comes to investment products, there is no doubt that Mutual Funds are one of the greatest as well as simplest tools for investments. But there are various mutual funds myths which occupy a great space in any investor’s mind unless they are not clear, the wealth creation becomes difficult.
Whatever be the nature of goods or products, there are always some myths surrounding the same. Such myths are because of lack of awareness or misinterpretation related to the products especially financial products.
In our country the myths related to investments products are very high, as a Financial Advisor, I meet numerous people and to be frank, very few people have the basic awareness about financial products and often confuses one product with another. People are interested to invest but they have many misconceptions or say mutual funds myths, which makes them hesitant to invest.
Myths hamper the understanding process of the investors which results in below average investing experience. The journey of an investor to create wealth over a period of time and manage money well gets disturbed or may not even begin because of such myths. So let’s bust myths related to Mutual Funds.
Top 9 Mutual Funds Myths
Myth 1 – Mutual funds are only for experts
Fact – Mutual Funds are especially for the common or retail investors who do not have time and expertise to go through the nitty gritty of finance.
Mutual funds are managed by experienced fund managers and their team of research analysts who carefully analyze the investment options available.
Myth 2 – Mutual funds are only for long-term
Fact – You can invest in Mutual Funds for few days to even decades. There are various categories of funds which suits the needs and time horizon of investors. There are various categories of Mutual Funds as per time and need –
Equity Mutual Funds – Long-term (beyond 5 years)
Debt Mutual funds – For few months to few months
Liquid Funds – for few days to few months
Myth – 3 Mutual Funds invest only in Stock Market
Fact – Mutual Funds have different categories. Only Equity Mutual Funds invest in stock market, Debt Funds invest in various Fixed Income Instruments like Government & Corporate Bonds, Treasury Bills, Commercial Papers, and Certificates of Deposits etc.
Various Fixed Income Instruments are not available for retail investors because of big minimum investment amount but you can invest easily in these through Mutual Funds.
Myth – 4 Mutual Funds need large investment amount to start
Fact – You can start investing in Mutual Funds with just Rs. 500. This limit varies with various schemes but mostly schemes allow you to start investing with Rs. 500, Rs. 1,000 or Rs. 5,000 at max.
Myth – 5 You need to have De-mat account for Mutual Funds
Fact – It is completely up to the investor’s choice. Even if you have De-mat account it is not compulsory to invest in them. You can invest easily without the De-mat account too.
Myth – 6 Mutual Funds are very complex and difficult to understand
Fact – Mutual Funds are the easiest investment option for any type of investor. You can consult professionals to understand more about Mutual Funds. A professional will add great value to your investing experience.
Myth – 7 Mutual Funds Investments requires very hectic and lengthy process
Fact – You can invest in Mutual Funds through few clicks or taps on your mobile/laptop. You can also invest through paper form with a single signature if you are not comfortable online or not so tech savvy. Simplest ways of OFFLINE/ONLINE method are available for investor’s ease.
Myth – 8 Mutual Funds can run away with investments
Fact – Mutual Funds are very well regulated by Government body SEBI whose sole objective is the protection of investors interest. You are always in control of your investment and there is full transparency as far as your investments are concerned.
Myth – 9 Money gets locked in Mutual Funds
Fact – Only Mutual Funds allow you to enter & exit anytime. Your money is with you and in your hands always. Only Tax Saving Funds have lock-in of 3 years. You can take out your investment in full or in parts, whenever you feel like. However, you should invest according to your need and goal. For any other requirement maintain an Emergency Fund.
The sole objective is to bust the mutual funds myths which have always resisted various investors to invest in Mutual Funds. It is time for investors to come out and explore the opportunities they have in creating wealth for themselves and fulfill their various financial goals.
In order to understand more about Mutual Funds and how investments work, you should always consult a Professional Financial Advisor, as they can assist you can in taking informed investment decision as per your needs and goals.