#FinancialBytes: Myths about mutual funds that need to be busted
Mutual funds have emerged as one of the best investment options for those looking to earn higher returns. Investing in mutual funds is easy and these suit all types of investors who can invest as per their budget. However, there are many myths and misconceptions that people have about mutual funds. Here are 5 myths about mutual funds that need to be busted.
Mutual funds are for the rich; need huge investments
Many people avoid investing in mutual funds, thinking these are only for the rich and one needs to invest a huge sum of money. However, one can begin mutual fund investments with as low as Rs. 500 or Rs. 1,000. Also, one doesn't need to do huge one-time investments, as investors can go for Systematic Investment Plans (SIPs) and invest periodically through mutual funds.
One needs to be expert to invest in mutual funds
Some people avoid investing in mutual funds thinking that they don't understand anything or because one needs to be an expert to make these investments. However, this is a huge misconception. In fact, mutual fund investments are a good option for those who don't understand investments. Mutual fund investments are managed by professional fund managers who do the research and analysis for the investors.
#3: Mutual fund investments offer guaranteed returns
While mutual funds can deliver high returns depending on the investor's risk appetite and fund management style, thinking that mutual funds guarantee high returns is wrong. Mutual funds are linked to the market and returns might fluctuate subject to ups and downs in the market.
Invest in mutual funds just once and reap returns forever
Many people have a huge misconception that financial planning for mutual fund investments is a one-time exercise and once they invest in mutual funds, they can reap returns forever. However, with mutual funds, investors need a financial plan to systematically achieve their financial goals, which might change over a period owing to market conditions. So, one needs to review their mutual fund investments periodically.
#5: Mutual funds are only long term investments
Also, many people believe that mutual funds are for long-term investments, but the truth is that one can also invest for medium and short terms too. Different investment durations have their own advantages depending on the type or category of funds.