One of the greatest wealth creations and which are highly famous among the investors are Mutual Funds. But there are ‘n' numbers of misunderstandings about this instrument. Here we are listing down some of the myths regarding mutual funds and try to clear out that and try to understand mutual funds better.
Ø Investing needs to be done at large- There is a common myth among investors that they need to invest a large amount of sum to fetch out the substantial return. But that's not partially correct. You can even invest Rs 500 every month through SIPs. Further you can always scale it up and even a contribution of Rs 2000 can give you back the return of good amount.
Ø Schemes with greater ratings give you better earning- Ratings of any agency can only give you the idea about its past performance but it can never predict its future. The ratings of the scheme keep changing according to its performance. It is advised to take the ratings as guidelines rather than the deciding factor for the fund purchase.
Ø Demat A/C- It is advised to have a Demat a/c but that's not mandatory. The investment in the mutual fund can be done without a Demat a/c through distributors. The online distributors have their own fund houses and their individual online platforms where funds can be bought and redeemed.
Ø Low NAV funds are better- You should never ignore a fund because it has a high NAV. You must have a look at all factors before purchasing it.
Ø Returns are guaranteed- These mutual funds are connected or linked with a market. Being subjected to the volatility of the market, mutual funds come out with the risk of losses. The returns of the underlying assets which range from high-risk equity to no risk government securities.