11 myths stopping you from Mutual fund investing

Mutual funds penetration in India has reached 17% of GDP as of December, 2021. In US, it stands at 140% of GDP whereas the world average is 75% of GDP. India still has a long way to go.

I have heard people saying, stock market is gambling, but more recently the person who is in his 40’s was saying that mutual funds itself is a complete gambling. I was a bit surprised and shocked.

In this article, I shared some of the common myths which may stop you from mutual funds investing

  • 1) Mutual fund is only for big investors
  • 2) Mutual fund is for long term
  • 3) Mutual fund invests only in Stock markets
  • 4) Investment is only for experts Investors
  • 5) Mutual fund is subject to Market risk
  • 6) I need to have Demat to start
  • 7) Mutual fund with lower NAV is good to start
  • 8) Invest and forget as it is long term
  • 9) Benchmark returns are Guaranteed
  • 10) Investing in many funds as Diversification
  • 11) Buying the Best Mutual fund

“Good Day is knowing about SIP,

Best Day is starting the SIP”

                 –   Ganesan Thiru 

Mutual fund industry has grown immensely in the last 5 years. The asset under management was 20.59 trillion rupees in 2017 and now it is standing at 39.53 trillion rupees as of August 31,2022. It is almost double the asset size in last 5 years. Mutual fund industry in India has created 10 crore folios as of May, 2021.

Mutual fund penetration in India has reached 17% of GDP as of December, 2021. In US, it stands at 140% of GDP and the world average is 75% of GDP. India still has a long way to go.

I have heard people saying the stock market as gambling, but more recently the person who is in his 40’s was saying that mutual funds itself is a complete gambling. I was a bit surprised and shocked.

In this article, I shared some of the common myths which may stop you from investing in mutual funds. 

Mutual fund is only for big investors

 Mutual funds are for everyone to save and invest. You don’t need to invest in lakhs and crores. You can start as small as few hundred Rupees which makes mutual funds accessible for everyone.

Some funds are accepting even starting from 100 rupee as SIP amount.

Mutual fund is for long term

 Mutual funds can be invested for a period of one day to long term of 5+ years also. Debt funds will be suitable for less risky investments with good returns in short term and equity funds will be more suitable for investments more than 3-5 years’ time period. Some of the Thematic and sectoral funds will require more than 7+ years based on the market movement.

Mutual fund invests only in Stock markets 

 Another biggest common myth is that all mutual funds invest in stock market. There are 3 broad classification of mutual funds and Debt mutual fund is suitable for people who invests for a period of less than 3 years. Even in Debt funds there are many classifications where the risk will be more in credit risk fund. 

Investment is only for expert Investors

 From being a traditional investing community, slowly Indian people had started accepting Mutual funds. The growth in the last 5+ years says that. Another point is that the reach of mutual fund advertisements through cricket celebrities has made inroads into the mind space of Investors.

 All this had made everyone to start investing into mutual funds. You can start your investments with as small as 500 with your Pan and address proofs. Complete your KYC process and then your investment journey starts. You can start with “Liquid fund or Ultra short-term fund” to start saving your money and then also get into Equity mutual fund for long term better returns.

Mutual fund is subject to Market risk

 Whenever you are watching any ads of mutual funds at the end, there will be line which will be read at great speed and that line is “Mutual fund is subject to market risk “.

 Everything in life has Risk associated with it and this is just the warning for everyone to understand what is that risk associated with the investment.

 Debt funds will have interest rate risks and equity mutual funds will have stock market risks. If you are able to choose fund based on your need and stick with the fund for the defined period, then the risk will be reduced to great level.

Thinking you should need  Demat account to start SIP Investing

 You don’t need Demat account to start Mutual fund investment, Only ETF requires Demat as it will be treated as share. 1 ETF will be considered as 1 share and unit price will be updated in your demat account.

Believing Mutual fund with lower NAV is good to start

 Mutual fund with lower NAV is good as you can accumulate more units. This is one of the common misconceptions.

 While starting a fund the NAV will be 10 and if you are going to invest 5000 Rs,

 you will be allocated 500 units.

 Say another mutual fund the NAV may be around 50 Rs,

 now you will be allocated only 100 units only.

 It is not the number of units that will define the returns later, it will be the performance of the mutual fund.

 Hence it is advised to invest in fund which is in the market for longer period of time.

Investing and forgetting since it is for long term 

 Some of the investors who are investing for longer period thinks that once you start SIP or lumpsum it is good to forget about it.

 If you are lucky that fund would have given you good returns. There are funds which will give you just benchmark returns of 12% and there are funds which would have given better returns around 15-18%.

Believing Benchmark returns from mutual funds as Guaranteed 

 Benchmark returns which can be mentioned while getting investments from investors was fixed as 12%. This is as per SEBI regulation.

 Even you may be shown the current investment returns of 18% as the permanent returns, hence this benchmark returns are advised. This benchmark return is also not guaranteed anywhere.

 You can expect returns on that line if you are monitoring and reviewing your investments frequently.

Investing in many mutual funds for Diversification 

 When I recommended mutual fund investments to one of my colleagues, he agreed to invest. For investing 5000, he chose 5 separate funds of 1000 each.

 This is not diversification. Just think, after 2 or 3 years if the invested funds are doing good and also your income has increased means you will be thinking of investing more.

 Investing in many funds will bring in the difficulty of monitoring the funds. Best thing is to diversify based on the total amount you are planning to invest and for what purpose you are starting this investment.

Always Buying the Best Mutual fund

 You would have even typed this in Google search or YouTube search.

 Best mutual fund is calculated based on the performance of the fund in that period which is 3 months. Every fund manager has his own convictions on the stock market and debt market.

 So, if you are watching the best funds once in 3 or 6 months, it is bound to vary.

 Invest in a fund which has consistently done well in the last 5-10 years in terms of returns and stick to the fund type.

Read more about Mutual funds in my book “1 Page Mutual fund plan”, Check out in my website https://ganesanthiru.com/1-page-mutual-funds-page/#1pagemutal

இந்தியாவில் மியூச்சுவல் ஃபண்ட் ஊடுருவல் டிசம்பர் 2021 நிலவரப்படி மொத்த உள்நாட்டு உற்பத்தியில் 17% ஐ எட்டியுள்ளது. அமெரிக்காவில் மியூச்சுவல் ஃபண்ட் மொத்த உள்நாட்டு உற்பத்தியில் 140% ஆக உள்ளது மற்றும் உலக சராசரி மொத்த உள்நாட்டு உற்பத்தியில் 75% ஆக உள்ளது.

பங்குச் சந்தையில் டிரேடிங் செய்பவர்கள் அதை சூதாட்டம் என்று சொல்வதை நான் கேட்டிருக்கிறேன், ஆனால் சமீபகாலமாக 40 வயதைக் கடந்தவர் மியூச்சுவல் பண்ட் யையும் முழு சூதாட்டம் என்று சொல்லிக் கொண்டிருந்தார். எனக்கு சற்று ஆச்சரியமாகவும் அதிர்ச்சியாகவும் இருந்தது.

இந்தக் கட்டுரையில், மியூச்சுவல் ஃபண்டுகளில் முதலீடு செய்வதைத் தடுக்கக்கூடிய சில பொதுவான கட்டுக்கதைகளைப் பகிர்ந்துள்ளேன்.

  • 1) மியூச்சுவல் ஃபண்ட் பெரிய முதலீட்டாளர்களுக்கு மட்டுமே
  • 2) மியூச்சுவல் ஃபண்ட் நீண்ட காலத்திற்கானது
  • 3) மியூச்சுவல் ஃபண்ட் பங்குச் சந்தைகளில் மட்டுமே முதலீடு செய்கிறது
  • 4) முதலீடு நிபுணர்கள் முதலீட்டாளர்களுக்கு மட்டுமே
  • 5) மியூச்சுவல் ஃபண்ட் சந்தை அபாயத்திற்கு உட்பட்டது
  • 6) தொடங்குவதற்கு என்னிடம் டீமேட் இருக்க வேண்டும்
  • 7) குறைந்த என்ஏவியுடன்(NAV) மியூச்சுவல் ஃபண்ட் தொடங்குவது நல்லது
  • 8) முதலீடு செய்து நீண்ட காலம் என்பதால் மறந்துவிடுங்கள்
  • 9) பெஞ்ச்மார்க் வருமானம் உத்தரவாதம்
  • 10) பல்வகைப்படுத்துதலாக பல நிதிகளில் முதலீடு செய்தல்
  • 11) சிறந்த மியூச்சுவல் ஃபண்டை வாங்குதல்

This podcast is hosted by Ganesan Thiru. I provide solutions for Investing in Mutual Funds, Stocks, Fixed Instruments, NCDs, Commercial Real Estate etc.,

Contact: 9444893050

I provide investments, insurance and loans.

Send in a voice message: https://anchor.fm/unlimitedwealth/message

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