Have you ever thought of initiating investments? Especially in Mutual Funds (MF)? If that’s the matter read on as we bust the top Myths of Mutual Fund investments for you.
If you have heard people saying that you need to have a big fat bank account to contribute in mutual funds, it is WRONG. You can now invest in mutual funds in the form of SIP (Systematic Investment Plans) starting as low as Rs.100. A SIP motivates you as a young investor to accumulate wealth. Moreover, once you start learning the art of investments and gain an insight into the importance, you become habituated to investments.
Top rated mutual fund= high returns:
Just because that mutual fund scheme you heard about rates highly, this does not mean it constantly will. One must keep track of their mutual funds and see to that it moves along with the markets. Also, as you know, mutual funds are subject to market risks. These risks may also play a role in building or bringing down the credibility of a fund.
Mutual funds (MF) investment = stock investments
Mutual funds may invest in a variety of assets such as overseas instruments, stocks, and even fixed income elements. But it doesn’t mean that a fund you choose to invest in is completely equity oriented. Further, funds like Hedge, Hybrid, and Debt oriented choose to invest more in the other aspects of investments rather than the equities. Thus, on the range of the risk intensity from high to low, there are various types of investments for an individuals risk appetite.
Time mutual fund (MF) investments:
Avoid the noise. People will have opinions. But, to make your mutual funds work, the time spent in staying invested matters rather than waiting for that one perfect time to withdraw your funds. Moreover, it is not necessary to time the market. All you need to do is stay invested no matter how the market behaves. You will receive rewards for being patient and avoiding what people say. However, just know where your investments stand and compare it with the market situations. This does not mean you need to keep a daily record of the markets. However, you would be following a healthy practice if you keep track of your investments at regular intervals.
Lower NAV= Better funds
NAV (Net Asset Value) refers to the market value of the investments. The existing rate of NAV does not determine future returns. For example, An investment of 20,000 with a NAV of 500 will fetch 40 units of that fund. Similarly, an investment of 20,000 in a fund that has a NAV of 40 will fetch you 500 units. Holding more units of one fund doesn’t necessarily mean the fund generates more profits. Have you thought about where the fund invests? What if they invest in avenues that aren’t generating profits currently? What if the fund with the higher NAV is well diversified and remains invested in avenues that constantly generate good returns? This will mean that the fund with the higher NAV is generating more profits than the one with the lower NAV.
It really is up to you whether you choose to believe these myths or follow your path to financial success. The basic necessity for achieving financial goals is to stay invested, avoid the noise and accumulate wealth through the advice of a financial consultancy.
Also read about: SIP small in size big in potential.