One of the greatest ways to invest in the stock market is via mutual funds, according to many. Nonetheless, a lot of people could be wary about making an investment in them. A primary cause of this reluctance is the many misconceptions that investors now have about mutual funds. Periodically dispelling these fallacies is crucial because they prevent investors from taking advantage of multicap mutual funds ability to generate long-term profit. Thus, the facts behind some of the most widespread misunderstandings about mutual funds are provided below.
Busting Common Myths About Mutual Funds
- Investing in Mutual Funds Requires a Significant Sum of Money
One of the biggest myths about mutual funds is that investing in them requires a sizable quantity of wealth. That being said, this is just untrue. The lowest initial lump sum investment required might be as little as ₹5,000, depending on the fund. The minimal investment is much smaller for Systematic Investment Plans (SIP). A mutual fund SIP may be started with as little as ₹500 (or even less) every month.
- Investing in Mutual Funds Requires You to be a Skilled Expert
This is a prevalent misconception among investors about mutual funds that many fall victim to. Thankfully, this is also inaccurate. A skilled group of fund managers actively manages the majority of mutual funds, making investment choices in response to changes in the market. Thus, you may invest in such well-managed mutual funds without any worry, even if you’re new to the stock market.
- Investing in Mutual Funds Yields Guaranteed Returns
Generally speaking, mutual funds don’t guarantee returns. This is so because the majority of mutual funds make investments in securities that are related to the market, such equity shares, whose value is mostly determined by changes in the market.
Nevertheless, compared to equity funds, which primarily invest in the stock market, debt funds, which allocate a much less percentage of their money to equities, could provide more consistent returns. On the other hand, in the long run, equities funds might provide returns that exceed inflation.
- You Need A Demat Account To Invest In Mutual Funds
While having a demat account is recommended, it is not a need in order to invest in mutual funds. You may physically invest in mutual funds via a number of Asset Management Companies (AMCs) and fund houses without a demat account. In these situations, you get a tangible certificate detailing the investments you have made in mutual funds.
- KYC is Needed for Mutual Funds More Than Once
When making a first investment, you must complete the KYC verification procedure as required by every fund institution. But this KYC verification is a one-time only procedure. But that’s not all. Alternatively, you may use the e-KYC capability to finish the verification procedure online.
Conclusion
There are a lot of additional fallacies about mutual funds which can be calculated via sip calculator in addition to the ones that were previously stated. It’s important for you as an investor to make sure that these misconceptions don’t discourage you from making mutual fund investments. Long-term wealth creation via mutual fund investing is possible when done correctly.
