The world of mutual fund investments is often ridden by unnecessary myths. Most investors stay away from investing in mutual funds because they think that the risks are way too high. To make things worse, there are many myths that perpetuate a false perception, which further hinders new investors from investing.
To ensure that you’re aware of what’s true and what’s false here is a comprehensive list of the three most common myths associated with mutual fund investments and why they just aren’t true:
1. Lumpsum cash is required for investment
People have the misconception that to invest in mutual funds online and/or offline, we need to be ready to spend large amounts of money to create profitable wealth. This couldn’t be further away from the truth.
In fact, a person can invest in mutual funds online with an amount as low as Rs.500. This type of investment is known as a Systematic Investment Plan (SIP). Equity and commodity mutual fund investments start at a price of Rs.1000. With time, the invested amount can be increased depending on the investment type, which can be short, or long term.
A systematic investment of Rs. 2000 per month for 20 years will amount to 20 Lakh at an annual interest rate of 13%. A surplus 10% yearly increase in the investment could generate 39 Lakhs in a 20 year period. That’s why brokers advise their clients to select an equity scheme that matches their investment tenure and risk profile. In terms of scale, there is no upper threshold for investments.
2. Investing in a mutual fund will make you rich!
The idea that mutual fund investments will make someone rich is yet another delusion. It is always risky to invest in mutual funds online or offline as the stability of the market is unpredictable. One can create wealth from mutual funds only by being patient and waiting for the right time to disinvest. Buying and selling different stocks to get higher profits can be disappointing as even if someone is earning profit from the sale of stocks they also have to pay capital gains tax for each stock sold at a higher price.
It’s important to make practical evaluations of the risk before buying equity funds, whether in a lump sum or SIP. Proper research and religiously following the stock report help in ensuring that the risks and rewards are balanced.
3. You have to be an experienced investor to create wealth
It is not necessary to be experienced in mutual fund investing before taking the plunge, as one can start investing and earning profit without being accustomed to mutual funds. Investors are always given supportive financial reports on their stocks and equity funds before selling or purchasing.
These reports are managed by experienced brokers, and without their support, it is impossible to transact in mutual funds.
When a stock upscale to around 40% of its basic value within three months, investors start investing heavily in that particular stock expecting higher returns. But, it is still possible that the value of the stock could drastically collapse. That’s why it’s important to keep reviewing the portfolio from time to time, almost as important as investing regularly.
The best way to realize a profit is to invest an amount that you are capable of losing; in this way, even if the stock starts to collapse, you could easily bear your losses. When the same stock value goes up, you could be earning twice the invested amount as a profit.
To invest in mutual funds online or offline, you don’t need to buy equity alone because there are also additional mutual funds such as currency equity, debt fund, and commodities. Foreign mutual funds are also available for investments since 2007.
The above pointers are just a reminder that there are different myths and false assumptions related to investments in mutual funds. Remember these when you decide to invest in mutual funds online or even offline so that your journey can be easy and seamless.
Get in touch with our representatives to make your transition into mutual fund investment hassle-free and safe!