Personal Finance

5 Common Myths about Mutual Funds

March 11, 2020

5 Common Myths about Mutual Funds

Mutual funds have gained immense popularity in India in recent times. The adoption of technology and the ease of investing along with favorable regulatory developments are attributed to the widespread engagement in these investment vehicles across cities.

While mutual funds offer a great platform for wealth creation and have been successful in garnering a wide investor base, there still remain certain misconceptions about mutual funds. Here are some common myths about mutual funds debunked.

1. You need to have a large amount of money to start investing

This notion couldn’t be any further from the truth; one does not need to have a large capital reserve to be able to invest in Mutual Funds to generate high returns. In fact, you can start investing with as little as Rs. 100 every month through the Systematic Investment Plan (SIP). As your income increases, you may increase this amount.

2. You must have a Demat Account

A Demat A/c is in no way a prerequisite for investing in mutual funds. You can invest in mutual funds directly with Paytm Money.

3. You need financial expertise to invest

Mutual funds are managed by financial experts with the ability to analyze your risk profile and find funds that meet your financial goals. Hence, you do not need to be an expert to start investing. While it is good to know about the ins and outs of the market and its operations, lack of this should not hold you back from investing.

4. You are guaranteed high returns

Mutual funds have been known to deliver high returns and this is one of the prime reasons why investors flock towards it. The truth, however, is not that straight forward. The return on mutual funds is not guaranteed. This is because these funds are market-linked. Your portfolio value may change based on market ups and downs. Therefore, while you have the scope to garner high returns, it is strictly that, a scope, not a guarantee.

5. You can invest in Mutual funds only for the long term

While the maximum benefits of investing in mutual funds can be derived by staying invested for a longer duration, it is not true that short term investing is not an option. On the contrary, you may invest in mutual funds for the short-term too instead of parking them in a bank account or FDs.