A mutual fund is one of the most trusted investment options in India. The total number of accounts or folios as per mutual fund jargon stood at ₹12.95 crores or 129.5 million while the number of folios under Equity, Hybrid and Solution Oriented Schemes stood at ₹10.34 crore0073 or 103.4 million. A mutual fund has a plethora of benefits like liquidity, diversification, flexibility, expert management, safety and transparency. It can also boast of affordability, tax-saving and a low lock-in period. However, just like any other investment option, a mutual fund also has its own share of misconceptions. It is necessary to break these mutual fund myths so you can go ahead confidently and change your perspective too.
1. You Need Big Capital for Investment
It is a common belief that you need large sums of money to invest in mutual funds. Else, it could be difficult to create wealth or obtain better returns. The fact is that investors can start with as low as ₹100 with an SIP or Systematic Investment Plan. It ensures a well-organised and disciplined approach. In an ELSS, the money can grow without being affected by the market movement for the next 3 years lock-in period or more. So, you do not have to be rich or save a lump sum amount to be eligible for a mutual fund. But it is up to you whether you wish to invest a big amount at once or pick small regular investments.
2. Mutual Funds are for Experts
One of the popular myths about mutual funds is that it is not everyone’s cup of tea. While having a fair idea can add to the benefits, limited knowledge does not hinder the process. But you must know your goals for investment and your risk appetite. The rest of the investment process will be handled by professionals who can make the right decisions and pick the most ideal mutual fund as per your needs and economical status. Rely on their expertise, learn how stock, bonds and equities work and keep a check on their performance. Further, make sure to learn the basics for an informed choice.
3. Mutual Funds are for Long Horizons
This is a false assumption that mutual funds are useful for long-term goals like buying a house, establishing a business or planning a wedding. The mutual fund myth buster here is that you can also invest for both short-term and medium-term needs. For instance, paying the rent, buying house appliances or signing up for a professional degree course can be planned with a mutual fund. You can choose to invest just for a day, for a few weeks or a couple of months. A mutual fund consists of debt, equity and hybrid models that include all forms of investments. These also offer fair returns and high liquidity.
These mutual fund myth busters will help change how you look at this financial too. You should not stop the investment in times of market dip. Invest in both debts and equities as per your appetite and age for optimal results.