There are certain myths regarding investment in mutual funds. In this article, we will clarify five of the most common myths associated with investing in mutual funds before you invest in Top Performing Mutual Funds in India
- You need a huge sum to invest in mutual funds.
You need not have a lot of money for investing in funds. You may invest with a sum as low as Rs. 500 when investing in Equity Linked Saving Schemes (ELSS) or Rs. 1,000 each month when investing in a mutual fund through Systematic Investment Plans (SIPs).
- Buying a top-rated MF scheme ensures better returns.
Mutual fund ratings are evaluations and based on performance of the fund after some time. So, a fund that is appraised exceedingly today, may not really keep up its rating a year later. While a highly rated fund is a decent initial step to short list a scheme to invest in, it does not guarantee better returns everlastingly. Investments in mutual funds should be followed as with respect to its benchmark to evaluate its performance to stay invested or exit.
- Investing in mutual funds is the same as investing in stock market.
Not all mutual funds invest only in stocks. To be honest, even the most broadened equity funds have a mix of equity and debt. Additionally, the sheer assortment of mutual funds means that there is a fund for every type of investor, traversing a risk spectrum of low to high and spreading investments that are importantly high in equities to those which have no exposure to equities.
- A fund with lower NAV is better.
This is a very popular misconception. A mutual fund’s NAV represents the market value of all investments made. Any capital appreciation depends on the price movement of its underlying securities.