4 Myths Busted About Mutual Funds Investment

If you are concerned about the security of your investment when you go for mutual funds, you are not the only one. Gone are the days of just depositing money and not reaping the benefits that you deserve. With a strategical analysis of the various risk levels, timing and schemes, you can make your money grow organically.Here are 4 common misconceptions about mutual funds that you need to let go of today:

When you invest in stock market, you have to decide on the equities to buy and sell at the right time to generate fund. While this may be a good option if you are well-versed with the market dynamics, for a new investor or a low-risk investor, it may not be a good option. When you invest in a mutual fund, the assigned fund manager makes investment decisions on your behalf. A qualified expert making investment decisions puts you in a better position, especially when investing in volatile markets.

Mutual funds are of many types. Apart from equity and equity-related funds, there are debts funds, balanced funds, hybrid funds, gold funds and so on.While equity funds are known for their high-return potential, debt funds carry lower risks. You can also invest in a hybrid fund (Mix of equity and debt funds) to take advantage of both the markets. It is vital to assess your risk appetite before investing in them as they all have varying levels of the same.

While a lot of investors opt for the ELSS (Equity Linked Savings Schemes) for the tax benefit it provides, saving tax is not the sole purpose of investing in mutual funds. In fact, mutual fund investment, if done well, can help you reach your financial goals. With so many options of funds such as the Index Fund, Debt Fund, Hybrid Fund, Equity Fund, etc., you can choose one based on your goals and your risk appetite. Moreover, with the option of SIPs, you can invest steadily towards your goal.

Many of you have often asked yourselves, “Is Mutual Fund Safe?” The answer is yes! Funding companies are governed by the Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds In India (AMFI). They provide a binding contract of reliability and security between you and the company. Each company qualifies for a license after thorough background checks and various security protocol tests that leave no loopholes that allow flight risks.

No investment is completely devoid of risks including mutual funds. There are many risks that mutual funds investment suffers from such as market risks, liquidity risks, etc. Therefore, it is necessary to scrutinize the offer documents diligently, stay updated on the business portfolio and assess the possibilities of profits and losses before investing.

If you are new to investing in mutual funds, it is essential to first determine your goals and your risk appetite. Based on your risk appetite, you can choose different types of mutual funds that carry different levels of risks. In general, investments with higher return potential also come with high-risk possibility. The key is to balance the two to meet your goals.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.