4 Myths about Mutual Funds Busted

There are many people who crave for higher returns yet remain sceptical about investing in mutual funds. It is because of several myths that hold you back from trusting mutual fund investments. Here we will bust 4 of the most popular myths to disperse some optimism:

  1. You need complete expertise to be able to make mutual fund investments

Beginners choose to avoid mutual funds considering their limited understanding of mutual funds. In fact, to look at it, mutual funds are the best place to station your money because of its nature. The fund manager does all the technical work such as analyses and research of stock, and other financial instruments. All of this is done considering your risk profile, investment objectives and other important factors. 

So it’s time to introspect, where else would you want to put your savings if not an expert or a trained professional to manage your money.

  1. You need a large sum to begin your mutual fund investment

It is a myth that you need larger investments to retain substantial returns because a systematic investment plan can start with an amount as low as Rs 500 a month. Once you save more or have more investment returns, you can increase this amount. Imagine if your invested funds are fetching you 12% returns on an average, you can make Rs 20 lakh by investing a modest sum of Rs 2000 in 20 years. You also have an opportunity to increase it at a gradual rate. You can do your calculations for the expected returns. So why, at all, should you hesitate in exploring SIP plans even if the investment is small initially.

  1. Mutual funds invest only in equity share that also makes it risky

The investors that keep themselves away from picking stocks individually because of volatile markets remain doubtful about mutual funds. It is so because they forget to consider other benefits that come with mutual funds such as a diversified portfolio, investment in debt instruments and many more. So it must be noted that mutual funds are only moderately risky and do not involve high risks such as in equity shares.

  1. SIPs mean you will have sure shot high returns out of your investment

Despite the fact that SIPs reduce the risk of investment, but it would be wrong to think that you will never lose money if you invest through a SIP. An economic slowdown, 2 years from now, may cause negative returns on the SIP started today. While a portfolio comes up only after thorough study, you should make a realistic assessment of potential funds in an unprecedented situation. Hence, be it a lumpsum investment or the much popular SIP plans, it is important to not underestimate the risks involved.

The good thing about the SIPs is that you can discontinue your investment at any point in time. If the fund begins to perform poorly, you can consider other mutual funds to invest in.