10 more mutual fund myths that can harm your investments (Part II)

In our previous blog, we debunked 10 mutual fund myths that 10 Indian investors need to stop believing. Today, we will discuss additional 10 mutual fund myths that most investors believe in.


Today, we will be demystifying mutual funds and revealing the truth behind common myths. As mutual funds continue to gain popularity among investors, it is essential to separate fact from fiction. In this concise guide, we will address prevalent misconceptions, providing you with accurate information to make informed investment decisions.


Join us as we navigate through the world of mutual funds, dispelling myths and shedding light on the realities that every investor should know. Read till the last to empower you with the knowledge needed to confidently navigate this investment avenue and maximise your financial success.


Myth 1: Mutual fund investments are riskier than stock investments.


Fact: Mutual funds offer diversification and professional management, making them potentially less risky than individual stock investments. Risk is spread across multiple securities, reducing the impact of individual stock performance.


Myth 2: All NAV-linked products are highly volatile.

Fact: NAV represents the net value of a fund’s underlying securities. The volatility of a fund depends on the underlying investments, such as equity, debt, or gold. NAV transparency enables performance assessment.


Myth 3: Physical gold is safer than gold funds.


Fact: Gold funds offer security and convenience without concerns about physical storage. Transaction costs are generally lower compared to physical gold investments.


Myth 4: Mutual fund investments cannot be pledged as security.


Fact: Mutual fund units can be pledged as security to financiers, enabling borrowing against them. Units can be marked with a lien for debt collateral purposes.


Myth 5: Tracking mutual fund investments is challenging.


Fact: Fund houses provide regular email and SMS notifications for investment transactions. Consolidated account statements (CAS) can be obtained, reflecting all transactions across fund houses and schemes, simplifying tracking.


Myth 6: High-performing funds guarantee success.


Fact: Performance should not be the sole criterion for investment decisions. Consider fund objectives, investment styles, risk appetite, and consult with a financial advisor for appropriate fund selection.



Myth 7: All mutual funds have a lock-in period.


Fact: Open-ended mutual funds can be bought and sold on any business day. Closed-end schemes or fixed maturity plans (FMPs) have specific investment and exit periods. Equity-linked savings schemes (ELSS) have a lock-in period of three years.


Myth 8: Sell mutual fund investments when markets are at a high.


Fact: Market fluctuations should not be a concern for long-term investors. Rebalancing portfolios based on investment objectives is advisable, but switching to debt funds may be considered for short-term goals.


Myth 9: Buy mutual fund schemes only when markets are good and high.


Fact: Timing the market is challenging. Regular investments through strategies like SIP and SWP, focusing on rupee-cost averaging, are more effective in the long run.


Myth 10: Tax on mutual funds is the same as other instruments.


Fact: Tax treatment varies based on the type of fund and holding period. Capital gains on equity-oriented funds and non-equity funds have different tax implications, including indexation benefits for the latter.




How many of these mutual fund myths did you believe in?


Demystifying common myths surrounding mutual fund investments is crucial for investors seeking financial growth. By understanding the facts behind these myths, investors can make informed decisions and navigate the mutual fund landscape with confidence.


With the guidance of financial advisors and a focus on long-term goals, investors can harness the benefits of mutual funds to achieve financial success. Remember, knowledge is power when it comes to mutual fund investments, and dispelling myths is the first step toward unlocking their true potential.



Interested in how we think about the markets?

Read more: Zen And The Art Of Investing

Watch here: Key investment mistakes to avoid in 2023.

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