Busting Some Myths Associated With Mutual Funds Investments

1. Busting Some Myths Associated With Mutual Funds Investments Predicting market trends and studying company portfolios, asset allocation and risk analysis – investing in securities entails a hundred different considerations for an investor. In such scenarios, one often looks for an ideal balance between risks and returns, investing too less and over-investing. Enter mutual funds investments. Mutual funds have always been perceived by investors and share brokers as sure-fire means of reaping maximum benefits of investment while reducing risks to the bare-minimum. However, due to the constant chatter and grapevine about the scope and limitations of investing in mutual funds, many investors are often surrounded by myths relating to the same. Such myths tend to instil faulty notions about mutual funds and deter individuals from opting for this investment avenue. So, here are some such myths around MF that need to be busted today: Myth #1: Mutual funds are only for experienced investors. Fact: One of the most common misconceptions around mutual funds is that they can be understood only by experts in the investment domain. On the contrary, owing to the security and diversification offered by mutual funds, these are great low-risk alternatives to investing in individual stocks and other such exclusive securities. As a result, mutual funds are beginner-friendly and help investors to invest in a systematic and careful manner as they begin their journeys. Myth #2: Mutual funds require one to invest large sums of money. Fact: No, mutual funds are typically very flexible in terms of their stipulated investment amounts. What makes all the difference is the specific mutual funds investment avenue that an investor opts for, i.e. the minimum investment amounts required by the underlying assets in the MF plan.

2. However, there are many mutual funds schemes that expect investors to put in as low an amount as Rs. 500/- to begin with. The meat of the matter is whether or not the right denominations of this aggregate amount are invested in each of the underlying assets. Myth #3: Opening a demat account is mandatory for investing in mutual funds. Fact: Many investors believe that one cannot start investing in mutual funds unless they open a demat account online. While a demat account facilitates an easier and more efficient investment process, it is not mandatory while opting for mutual funds. Without a demat account, an investor can still invest in mutual funds by directly coordinating with the fund house. Alternatively, there are also many online platforms available to directly invest in mutual funds online. Myth #4: Investing in mutual funds involves an elaborate documentation process. Fact: Contrary to popular belief, the process involved in starting your journey into mutual funds investment is actually quite simple. All that one usually requires to undertake before starting out is to complete one’s KYC process with the help of an investment intermediary who is registered with SEBI. The KYC process typically involves submitting an identity proof and address proof of the individual in an effort to verify the individual’s legal status and prevent any forgeries. Post this KYC procedure, one may start his/her investment in mutual funds with or without a demat account (as mentioned earlier). Myth #5: The past performance of a mutual funds scheme determines its future performance. Fact: While considering the past performance of any security or scheme provides one with an insight on its success rate, reputed investment advisors and share brokers believe that it is not the only determinant to selecting the right mutual funds scheme. This is because the current market situations and future trends are just as likely to affect the performance of the mutual funds as

3. its past records. Thus, before you invest in mutual funds online, it is important to carry out a consolidated analysis keeping in mind all significant factors, including the current market scenario, predictions of future trends, one’s current objectives and goals and the information contained in the company’s prospectus. Myth #6: Mutual funds investments are limited to assets from the domestic market. Fact: On the contrary, MFs are great opportunities for investors who are keen on exploring the international markets but are apprehensive to do so in isolation. According to Wikipedia reports, investors often find it difficult to directly invest in foreign markets. Mutual funds help one to explore one’s avenues freely while also being secured by the other investment securities in the scheme. Conclusion Investing in mutual funds can indeed prove to be a fruitful and careful exercise, all at once. However, being well-informed and able to discern myths from facts can help individuals to invest in mutual funds in a pragmatic and organized manner, without any pre-conceived notions. We would be happy to guide you through your journey into mutual funds. Click here to avail of our investment services today!