SOME MYTHS AND FACTS RELATED TO MUTUAL FUND
There are some such myths (lies) and truth (FACT) related to mutual fund investment, which are very important for a new investor to know, today we are going to talk about some such myths and truths of MUTUAL FUNDS,
MUTUAL FUND INVESTMENT MYTH 1
We must have a DEMAT ACCOUNT for mutual fund investment,
The truth of this MYTH (FACT) –
The truth is that it is not mandatory to have a DEMAT ACCOUNT for mutual fund investment, we have two options to HOLD the UNIT we get in mutual fund investment – first, PHYSICAL ACCOUNT STATEMENT MODE, in which our mutual fund investment In return, the statement of the unit is received at our home, BY POST, or COURIER,
And the second is – HOLD UNIT IN DEMAT ACCOUNT, which is required only to hold the unit of EXCHANGE TRADED FUND,
Every investor has the option of how he wants to keep the units of his mutual fund investment, ACCOUNT STATEMENT or DEMAT ACCOUNT,
In this way, it is not mandatory to have a DEMAT ACCOUNT for investing in Mutual Funds in India, because we can take it in UNIT HOLDING STATEMNET PAHYSICAL MODE,
Therefore, being an investor, it is important to understand the truth of this common misconception (MYTH) related to mutual funds, so that we can become a better investor.
MUTUAL FUND INVESTMENT MYTH 2
We need to have a lot of money for mutual fund investment,
The truth of this MYTH (FACT) –
Regarding this MYTH, nowadays in India, we see an advertisement on TV called “Mutual Fund Sahi Hai”.
Gets, in which it is told, that you can invest even 500 rupees every month in mutual funds,
And the truth is that with the help of SIP for mutual fund investment, you can start investing with as little as Rs.500 INSTALLMENT,
And if we talk about LMUP SUMP (ONE TIME INVESTMENT) investment, then you can deposit at least Rs 500 in Equity linked Savings Schemes (ELSS).
And in other mutual fund scheme also you can deposit 5000 rupees as LUMP SUMP investment, and even further when you have money you can invest in it,
In this way, one thing is very clear that we should have a lot of money for mutual fund investment, it is a completely wrong concept.
MUTUAL FUND INVESTMENT MYTH 3
Mutual fund investment is only for LONG TERM INVESTMENT,
The truth of this MYTH (FACT) –
Generally, there is such a belief in the minds of people regarding mutual fund investment that we have to invest in it for a long time, or we have to keep investing REGULAR for a long time,
While the truth is that for how long to invest in mutual funds, it can be done as per the needs of an investor, SHORT TERM or LONG TERM,
By SHORT TERM you mean many such mutual funds, in which you can invest for a few days, or a few months or even a few years, and later you can withdraw your money,
Like – LIQUID MUTUAL FUND which are for a very short time, whose portfolio maturity is 90 days or less,
Or investment can be made in Ultra Short-Term Bond Funds, whose portfolio maturity is less than one year,
On the other hand, if we talk about LONG TERM investment, then mutual funds also have Long-Term Income Funds where we can invest from 3 years to 10 years,
Like – EQUITY BASED MUTUAL FUNDS,
In this way, it is also very clear that LONG TERM INVESTMENT should be done for investing in mutual funds, it is not at all necessary, according to the investor’s needs, he can invest for a short time i.e. for a few days, or if he wants, for a long time. Time, can also invest for 10 years or more.
MUTUAL FUND INVESTMENT MYTH 4
Mutual fund investment is only for EXPERT people,
The truth of this MYTH (FACT) –
Another common belief related to mutual fund investment is that to invest in mutual funds, we have to be very expert, or we must have a lot of experience,
The truth is that mutual fund investment is made for such investors, who do not have much knowledge and experience of investing, but they want to earn better returns from investing their money,
Such people can invest in mutual funds, because mutual fund investments are managed by EXPERT logos of the stock market.
And in this way, a common man who does not know about stock market investment at all, he can also get the benefit of stock market investment, by investing in mutual funds, he can take the service of a stock market expert at a very low fee, and on his investment can expect to make better profits.
MUTUAL FUND INVESTMENT MYTH 5
Mutual fund investment money is invested only in the stock market?
The truth of this MYTH (FACT) –
Another common belief regarding mutual fund investment is that both mutual fund and stock market investment are done in the same way, and the entire money of mutual fund is invested in the stock market only.
While the truth is that mutual funds make many different types of investments apart from the stock market, which are not accessible to the common man, because such investments require a lot of money at once,
Like – Government Bonds or Corporate Bonds, Money Market Instruments like – Treasury Bills, Commercial Papers, Certificate of Deposit, Collateral Borrowing & Lending Obligation (CBLO) and many more.
In this way, being an investor, we should understand that investing in mutual funds does not just invest in the stock market, and therefore investing in mutual funds, common investors become part of many different types of investments, which are generally not accessible to common people. Are outside the investment, such as – Government Bonds, or investment in Government Sector Scheme.
MUTUAL FUND INVESTMENT MYTH 6
The one who invested earlier in HIGH VALUE NAV has more profit, and the new investor will not get more profit by investing in this HIGH VALUE NAV?
The truth of this MYTH (FACT) –
Another common misconception that every new investor has in mutual fund investing is that investing in high value NAVs will not bring profits.
Whereas the truth is that the higher NAV value indicates that the mutual fund has done a great job, due to which its NAV has increased,
And there is nothing that will give less profit from increased NAV,
If you invest in a MUTUAL FUND with a HIGH VALUE NAV, then further you will get the same profit and profit in the same proportion as the old people will get,
The point to be noted in this regard is that most of us understand NAV like the PRICE of a stock, and just as we do not like the PRICE of a stock with a high price, similarly most people think that the NAV with a high price won’t be good either
While there is nothing like this in the case of mutual funds,
All you need to think is that whether you invest in any mutual fund, whether its NAV is very high or very low, whatever that mutual fund earns, all the investors investing in that mutual fund will get equal benefit from its earnings.
whether the investor is new or old.
MUTUAL FUND INVESTMENT MYTH 7
Investing in mutual funds whose NAV is less, is it better to invest in mutual funds or is it more beneficial to invest in NFO (NEW FUND OFFER)?
The truth of this MYTH (FACT) –
Another common belief in mutual fund investing that every new investor has is that the lower the NAV of the mutual fund, the better it is.
Like – suppose two mutual funds in which the NAV of one is Rs 10 and the other is Rs 30, then a common investor feels that investing in NAV of Rs 10 is more beneficial for him because it is cheaper, and he Will get more UNITS,
While this is a totally MISCONCEPTION,
We should understand very well that the NAV of a mutual fund is not like the PRICE of a stock.
Where the stock of a company is Rs 10 then we will get more shares, and if the share price is Rs 30 then we will get less shares,
Mutual fund NAV is the BOOK VALUE of a mutual fund, it is not the market value, so if the BOOK VALUE of a mutual fund is Rs 10, or the NAV of a mutual fund is Rs 30,
There is no relation between these two,
From mutual fund investment, we get as much profit as that mutual fund earns, whether it is a mutual fund with NAV of Rs.10 or a mutual fund with NAV of Rs.30.
MUTUAL FUND INVESTMENT MYTH 8
It is better to invest in new mutual fund NFO than investing in existing mutual funds
The truth of this MYTH (FACT) –
Along with this, there is an assumption in the mind of the investor about the new offer of a mutual fund that the same benefit that we get from investing in the IPO of a stock, we will get the same benefit from the new offer of the mutual fund, NFO.
which is totally wrong,
Stocks are always at market price, while mutual funds are always at their book value, so when you buy a mutual fund doesn’t matter much.
So whether you buy mutual funds from a NEW FUND OFFER or from an already running mutual fund, it does not matter much,
Because even at the time of NEW FUND OFFER, the mutual fund is at its BOOK VALUE, and the NAV of the already running mutual fund is also its BOOK VALUE.
MUTUAL FUND INVESTMENT MYTH 9
Investment in TOP RATED MUTUAL FUND scheme has full GUARANTEE to get better returns.
The truth of this MYTH (FACT) –
Another common misconception that every new investor has in mutual fund investing is that investing in TOP RATED mutual funds gives better returns,
Whereas the truth is that the RATING of any mutual fund is absolutely DYNAMIC, and as the performance of the mutual fund changes, its RATING also keeps on changing.
Therefore, if today’s rating of a mutual fund is very good, then it is not necessary that that mutual fund will remain on the same rating in future also.
Because, wherever you are told the RATING of this mutual fund, it is also told as a DISCLAIMER that on the basis of PAST PERFORMANCE it cannot be GUARANTEE to perform in FUTURE,
“Past Performance Does Not Necessarily Guarantee Better Returns In Future”
It can be expected from TOP RATING MUTUAL FUND that if it has done well before, it can do well in the future, and therefore it can be considered better for a new investor to invest in TOP RATED MUTUAL FUND, But it should be noted that top rated mutual fund will always do well, no GUARANTEE can be given for this.
Friends,
I HOPE you have been helped by this topic of mutual fund investment to understand some truths and lies related to it.