Are you avoiding mutual funds because of common misconceptions? Do you think they are too complicated? Many people hold onto myths about mutual funds that stop them from making the right choices. Let’s explore 5 mutual fund myths you need to stop believing.
Myth 1- You should be a financial expert to invest in mutual funds
This is not true. Mutual funds are designed for everyone. Even if you are not a financial expert, you can invest with confidence.
Mutual funds are managed by professional fund managers. They make investment decisions for you. You don’t need to analyze stocks, track market trends, or have deep financial knowledge. The fund manager takes care of all that.
Moreover, mutual funds come with helpful resources. Fact sheets and online tools explain how each fund works. These tools are simple to use and can guide you in choosing the right fund.
Additionally, all you need is to set your financial goals. Are you saving for retirement, your child’s education, or something else? Once you know your goal, you can pick a fund that matches your needs. There are funds for different levels of risks and returns.
Myth 2- You need a lot of money to start investing
Mutual funds are accessible to everyone, no matter their income level. You don’t need a fortune to start investing in a mutual fund.
Many funds let you start investing with a small amount of money. For example, Systematic Investment Plans (SIPs) allow you to invest monthly, weekly or quarterly. With SIPs, you can contribute regularly instead of needing a large lump sum. Over time, these small investments add up and help you build wealth.
Moreover, starting small reduces the pressure of committing a large amount right away. This makes mutual funds an easy option for beginners. So, even if you have limited savings, you can still begin your investment journey.
Myth 3- Mutual funds always give high returns
This belief is misleading. While mutual funds can offer good returns, they are tied to market risks. External factors like economic conditions and global events can influence fund performance. So, no mutual fund can guarantee high returns every time.
For example, equity funds may deliver higher returns in the long term. However, they are also more affected by market fluctuations. But, debt funds are more stable. They invest in fixed-income securities like bonds.
Mutual funds come with risks, and their performance can go up or down. So it is important to know how much risk you can handle and what your financial goals are. This helps you pick the right funds that match your needs and be ready for any ups and downs in the market.
Myth 4- Once you invest in mutual funds, you can’t withdraw your money
Many people think that investing in mutual funds means you cannot access your money for a long time. This is not true for most funds.
Most mutual funds are open-ended. This means you can withdraw your money anytime you need it. For example, if you invest in liquid funds or short-term funds, you can easily take out your money within a few days. These types of funds are great for those who need quick access to their cash.
However, some funds do have a lock-in period. For instance, ELSS (Equity Linked Savings Schemes) come with a three-year lock-in. But even after the lock-in, you can withdraw your money without restrictions.
Myth 5- Mutual funds are suitable only for long-term investments
Many people think mutual funds are only useful if you’re investing for the long term. This is a common myth, but the reality is much broader. Mutual funds are not just for long-term goals. They can serve both short-term and long-term financial needs.
For short-term goals, you can choose funds like liquid funds or ultra-short-term funds. For example, if you need to save for an upcoming expense like a vacation or emergency, these funds are a great choice. These funds are designed to offer quick access to your money.
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On the other hand, for long-term goals, equity or balanced funds are more suitable. These funds focus on wealth creation over a longer period, like saving for retirement or your child’s education. They have the advantage of compounding and can give higher returns over time.
Whether you need your money in a few months or several years, mutual funds offer options that fit your timeline and needs. So, save money for your future with effective financial planning.
Final thoughts
Investing in mutual funds is a popular way to grow your money over time. However, many myths about mutual funds stop people from making the right choices. But the reality is different. So it is important to know the mutual fund myths you need to stop believing. By knowing the facts and ignoring the myths, you can invest in mutual funds and create a strong financial future.
