One of the most challenging obstacles is overcoming beliefs that have no basis in reality or have no place in the investment process. But because everyone else does, we do. Following are some of the most prevalent investor misconceptions and realities regarding mutual fund investment.
A feature called a Systematic Investment Plan (SIP) in a mutual fund allows you to invest a regular monthly instalment in the fund, based on which units would be acquired in your portfolio. As a result, you may start to invest in mutual funds with as little as Rs. 500 per month. The sooner you start investing, the better return you will get because of compounding.
- To benefit from diversification, one must invest in several mutual funds:
By investing in various asset classes, including debt, money market instruments, and equity, mutual funds enable investors to spread their risk across a broader range of investments. Investors can diversify their portfolio using mutual funds based on risk tolerance and periodically change it as needed, wherever and whenever possible.
- Mutual Funds require a sizable investment:
You may start investing in mutual funds with as little as Rs. 500 per month thanks to SIP investments which allow you to make a regular monthly contribution to the fund based on which units will be added to your portfolio. Your money will perform better the earlier you start investing because it will have more time to grow.
- Higher returns are ensured when investing in highly rated mutual funds:
Market risks can affect mutual fund results, which sometimes change. A fund’s potential future performance cannot be guaranteed, even though it may have done well in the past. Mutual fund investments must be kept track of and periodically evaluated to ensure they meet the investor’s needs.
- To purchase mutual funds, you must have a Demat account:
A Demat account is not required to invest in mutual funds, which is a fact. You may pick the investment fund and send a check by completing the application form and ensuring you are KYC-compliant. You could work with a financial adviser the entire time to simplify the investment process and receive excellent advice.
- Invest once and never again:
Mutual funds are not fixed-deposit accounts (FDs), where you may invest once and forget about them. Mutual fund investments must be made consistently through SIP if one wishes to earn significant returns. To achieve financial objectives, systematic and regular investment is crucial. Stable investment is sometimes insufficient. The importance of portfolio reviews is equal to that of frequent investment.
- A Higher Nav Scheme Has Performed At Its Best:
This mistake is widespread since most people associate mutual funds with shares. The NAV of a scheme is just a reflection of the market value of the underlying shares owned by the fund on any given day. Following the mutual fund investment plan, shares held by mutual funds may be purchased or sold anytime the fund manager deems it suitable (Buy-Hold-Sell). The fund manager can sell a stock if he believes it has peaked.
The fund is only sometimes pricey if its NAV is high. A high NAV shows that the strategy has performed well over time.
Clear your head of any false beliefs you may have regarding mutual funds. All of these mutual fund misconceptions exist only to discourage you from investing in them. Invest wisely!