Myths
Facts
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High Risk Only: Mutual funds are always high-risk investments.
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Diversification: Mutual funds offer diversified investment portfolios.
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Guaranteed Returns:Mutual funds guarantee high returns.
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Professional Management: Funds are managed by professional fund managers.
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Only for Experts:Only financial experts should invest in mutual funds.
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Affordability: Investors can start with small amounts.
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High Initial Investment:You need a large amount of money to start investing in mutual funds.
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Liquidity: Mutual funds can be easily bought and sold.
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Lock-In Periods:All mutual funds have long lock-in periods.
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Variety: They come in various types catering to different risk appetites and goals.
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No Flexibility:Mutual funds do not offer flexibility in investment options.
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Regulated: Mutual funds are regulated by financial authorities for investor protection.
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Always Lose Money:Investing in mutual funds always leads to financial loss.
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Transparency: Funds provide regular updates on their holdings and performance.
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Myth: Mutual Funds are for experts
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Fact: In fact, Mutual funds are meant for common investors who may lack the knowledge or skill set to invest in the securities market. They are professionally managed by expert Fund Managers after extensive market research for the benefit of investors. A mutual fund is an inexpensive way for investors to have a full-time professional manage their money.
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Myth: Mutual Fund investments are only for the long term
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Fact: Mutual funds can be for the short term or the long term depending on your investment horizon and objective. There are various schemes such as Liquid Funds (short duration), Ultra Short-Term Bond Funds, Short-Term Bond Funds, and Long-Term Income Funds that cater to different timeframes.
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Myth: Investing in mutual funds is the same as investing in the stock market / Mutual Fund is an equity product
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Fact: Mutual Funds invest in a variety of instruments including equities, bonds (both corporate and government), and money market instruments like Treasury Bills, Commercial Papers, and Certificates of Deposit. This diversification allows retail investors to access investments that typically require large capital.
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Myth: A Mutual Fund scheme with a NAV of ₹10 per unit is better than a scheme with a NAV of ₹25 per unit
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Fact: The NAV of a fund reflects the market value of its underlying investments—not an indicator of performance. Capital appreciation depends on the price movement of these investments rather than the NAV itself.
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Myth: One needs a large amount of money to invest in Mutual Funds
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Fact: You can start investing in Mutual Funds with small amounts. Many schemes allow you to begin with as little as ₹500 for an SIP or ₹5000 for a lump-sum investment.
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Myth: One needs to have a Demat account to invest in Mutual Funds
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Fact: Holding mutual fund units in Demat form is optional (except for Exchange Traded Funds). Investors can choose between Demat and traditional physical statements.
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Myth: A scheme with a higher NAV has reached its peak
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Fact: A high NAV simply reflects the market value of the scheme’s underlying assets. It does not indicate that the scheme’s performance has peaked; rather, it often reflects a history of good performance.
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Myth: Buying a top-rated mutual fund scheme ensures better returns
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Fact: Mutual fund ratings are dynamic and based on past performance, which is subject to market fluctuations. While a top-rated fund is a good starting point, it’s important to track its performance against its benchmark over time before making investment decisions.
