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Allow us to bust MF myths instead of firecrackers
This Diwali, it’s time to bust some common myths investors? have about Mutual Funds.
It’s quite simple really. It’s like you give your money to a professional to invest it on your behalf. You just sit back and enjoy the returns. That’s all Mutual Funds are – an investment vehicle!
THE INVESTING PROCEDURE IS DIFFICULT
It’s one of the simplest procedures. Approach your Bank, a Fund House, a Financial Advisor, a Broker or an MF distributor. Fill one form. Give the money. That’s it. You are done.
MFs ARE RISKY
Every single investment comes with a risk. Even your Fixed Deposits. Same goes for MFs too. In fact, by investing across hundreds of assets, MFs manage to lower their risk exposure. Funds like Arbitrage Funds or Liquid Funds have really low risk.
YOU NEED A DEMAT ACCOUNT
Or even a trading account, for that matter. You can simply buy Mutual Funds by giving a cheque. Alternatively, you can use your banking account to buy a Mutual Fund.
IT IS DIFFICULT TO SELL MFs
You can sell your MF holdings in two ways – back to the Fund or to another investor. In the first case, you just inform the Fund House. They have to buy it back. Or, you trade through an Exchange.
MFS ONLY INVEST IN Equity
MFs invest across asset Classes like Gold, Government Bonds, Corporate Debt, etc. And MFs have to be very clear about informing their investors about these assets. So you’re never in the dark.
MFs ARE ONLY FOR LONG-TERM
INVESTING Not really. You can easily invest in Debt-based Funds for the short term. In fact, there are special MF schemes – Liquid Funds and Short-Term Debt Funds – for creating your Emergency corpus.
YOU NEED TO INVEST MF MYTHS A LARGE AMOUNT
Of course not! You can invest even ?500 if you opt for a Systematic Investment Plan (SIP). Through this, you invest every month. In the case of a lump-sum investment, you have to invest at least ?5,000.
IT’S BETTER TO OPT FOR LOWER NAV FUNDS
The Net Asset Value (NAV) represents the value of the assets that the Fund has invested in. It has nothing to do with whether a Fund is available cheaply.
NEW FUNDS HAVE GREATER CHANCE FOR GROWTH
The only reason a new Fund has a lower NAV is because it has invested a smaller amount in Stocks and Bonds. This does not mean it has a greater scope for growth. You need to look at the Assets and Fund Manager for potential.
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