InvestingMutual funds are less risky & other common myths related to investing in the popular savings instrument Last updated: 2018/02/26 at 11:08 AM Liatin Rivera Published May 18, 2022 Share 6 Min Read SHARE So you’ve decided to invest your money, but where to invest is still a question that people like you and me constantly face. Mutual Funds, where you give your money to someone more informed about the markets for high returns, is the best choice for beginners. However, there are many myths associated with investing and picking the best mutual funds. Gaining knowledge is never-ending exercise. We spoke to Abhinav Angirish, Managing Director, Abchlor Investment Advisors Private Limited told Moneycontrol about the various misconceptions which many investors hold while buying mutual funds. Here are the myths:market value of the portfolio today. Older the fund, higher is the NAV as the market value grows over a period of time.” src=”https://static-news.moneycontrol.com/static-mcnews/2018/01/10-17.jpg” alt=”Lower the NAV, cheaper is my fund | The Commonly believed that when the NAV is lower, the fund is cheaper and hence will provide higher returns. NAV is nothing but the current market value of the portfolio today. Older the fund, higher is the NAV as the market value grows over a period of time.”>2/9Lower the NAV, cheaper is my fund | The Commonly believed that when the NAV is lower, the fund is cheaper and hence will provide higher returns. NAV is nothing but the current market value of the portfolio today. Older the fund, higher is the NAV as the market value grows over a period of time.3/9The investment has to be for very long-term | When someone suggests a mutual fund, the first question asked is whether it is “long-term ” investment. The fact is it’s good if you invest for a very long term, as you reap the benefits of compounding, but one who needs money sooner can also invest with a view of getting the better return than other asset classes. There are multiple schemes to choose from that suit different types of investors.4/9The investment sum has to be big | A common myth among investors is everyone feels one must have a large number of funds to invest in a mutual fund. But the ground reality is that you can start investing in a fund with as small as Rs 500 only.5/9Mutual fund equals to no risk | Many mutual fund investors feel making investments in any scheme is risk-free and it is certain that it will perform around their expected mark, which is the reason regulators have made it compulsory for the fund runners to apprise the client about the risks of the investments. This acknowledgement is always made to you, when you sign the document of an agreement while investing, which is often missed by investors.6/9History will always repeat | Everyone who tends to invest in mutual funds first looks at the historic performance of the fund and then decides to make the investment. Therefore we can clearly say everyone feels the future performance will be linked to the previous performance and will fall in line. If future was based on past, every analyst would have made money thick & fast which is clearly a myth.7/9One can add or subtract stocks according to their choice | There is a common myth in everyone’s mind that you can customise your portfolio, that is, one can add or subtract a particular stock from a fund if you want which is clearly not true as this feature is only available in PMS (Portfolio Management Services) and is outside the scope of mutual funds.8/9Investing in higher rated funds will fetch higher returns | People believe that the fund which has the highest ratings are safe and will give the best returns. The truth is mutual fund ratings are dynamic and are based on the performance of the fund at that given point. So, a fund that is rated highly today, may not necessarily maintain its high rating tomorrow and it also doesn’t guarantee a better performance going forward.9/9Dividend declared by mutual funds is windfall income | Manish Kothari – Director, Mutual Funds, Paisabazaar.com said that mutual fund dividends are not windfall income as it is often projected to be. The dividend amount is paid out of investor’s own investment and hence, the fund’s NAV gets reduced by the amount paid as dividend. Moreover, the dividend amount is calculated on the fund’s face value, not the NAV. For example, assume that a scheme with a NAV of Rs 40 declares a 30% dividend. The dividend amount, in this case, would be Rs 3 (30% of Rs 10 face value) and the NAV of that scheme will come down to Rs 37 after the dividend record date. “Investing in a mutual fund for the purpose of availing dividends is a futile exercise, and not recommended. Instead, opt for the growth option of mutual fund schemes to benefit from the power of compounding effect,” said Kothari.[“Source-moneycontrol”]You Might Also Like $70,000 Student Loan Monthly Payment: Navigating the Challenges Exploring the Convenience of Ruoff Mortgage Loan Payment Options Canvas Loan Payment: Simplifying Your Repayment Process Down Payment for Business Loan: A Smart Investment Strategy Demystifying the Down Payment on Construction Loans: A Comprehensive Guide TAGGED: &, are, common, funds, in, instrument, INVESTING, Less, Mutual, Myths, other, popular, Related, Risky, Savings, the, to Liatin Rivera May 18, 2022 Share this Article Facebook Twitter Email Print Share Previous Article This Yamaha RX135 gets new lease of life; Modified into a Cafe Racer Next Article Wix Announces Web Design Tools for Microsoft Office 365 Most Viewed Posts 20 Fitness Franchises: Planet Fitness and Beyond liberty bank tiny home loans coffee break loans reviews Stocks making the biggest moves premarket: COST, YUMC, DIS, C, JNJ & more The Advantages of Getting a payday loanMost Viewed Posts 20 Fitness Franchises: Planet Fitness and Beyond liberty bank tiny home loans coffee break loans reviews Stocks making the biggest moves premarket: COST, YUMC, DIS, C, JNJ & more The Advantages of Getting a payday loanRecent Posts Brands look for a spot in the sun Luxury takes a deep dive