MISCONCEPTIONS ABOUT MUTUAL FUNDS
Investments need careful planning and assessment. Mutual fund investmentsare no different. This article will cover some of the common misconceptions associated with investments in mutual funds.
- Investing in top-ranked mutual funds means reaping guaranteed returns
Mutual funds are subject to market risk and an individual’s profit on the portfolio depends on the fund’s performance. Mutual funds invest their corpus in different financial investments, which can be volatile depending on market volatility. This means that the positioning of your funds could rise or devalue, depending on the market scenario. Thus, top-ranked mutual funds might not always sustain their title in the future. Thus, the returns on top-ranaked mutual funds are not guaranteed.
- You require a substantial amount to invest in mutual funds
This is a common notion among a majority of investors. Onedoes not need to have high income or own a lot of capital to invest in mutual funds. Mutual funds can be boughtat an amount as low as Rs. 100 per month through the SIP (Systematic Investment Plan). One can invest the desired investment amount periodically, such as daily, bi-weekly, monthly, quarterly, annually etc. Additionally, one also has the option of investing in mutual funds via lumpsum.
- You should stop SIP investment during a market crash
Akin to finishing a medical course to be fully cured of whatever is ailing you, your SIP investment must be continued through its term to achieve the desired results. Your SIP investment is a customised investment plan, primarily suited for the long-term. Thus, you should not stop your SIPseven during a market is crashing. Experts often advise investors to continue with their SIPs without paying much attention to market movements. If a particular fund has been consistently underperforming and after doing your research, you believe that it cannot sustain, only then you should withdraw from that fund and deposit the investment in another fund.
- All mutual funds qualify for tax-deduction
ELSS (Equity-Linked Savings Scheme) is a type of mutual funds that invest in equities and equities related instruments. ELSS tax saving mutual funds offer dual benefits of wealth generation and tax-saving.ELSS tax saving funds are eligible for ELSS tax exemption of up to Rs1.5 lakh u/x 80C. An investor can save up to Rs46,800 by investing in theses ELSS tax-saving No other mutual funds offer tax benefits except these tax-saver mutual funds.
Now that we have cleared some of the common myths prevailing among mutual fund investments, you can begin your investment journey with them. If invested at the right time and at the right place, mutual funds have a huge potential to deliver inflation-beating returns. However, do not ignore your risk tolerance and investment horizon while choosing the best funds for your investment portfolio. Happy investing!