5 Mutual Fund Myths Busted| North Loop Official Blog
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01 Feb 2021

5 Mutual Fund Myths Busted

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Introduction -

In this article, we will bust five popular myths about mutual funds.

Myth 1 - Too young to start investing

Fact -

The fact is that the earlier you begin to invest, the more wealth you can accumulate. It also gives you more time in hand to plan your financial future. The extra time can also be in your favour when the market suffers a downfall.

That is because it can give you time to redeem your money if you remain invested. You can also use the extra time to hone your skills and become a successful investor from an amateur.

Many experts also feel that it is better if you invest in mutual funds from an early age. That is because you can remain invested in the market for a long duration and have time to your advantage when the market suffers a crisis.
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Myth 2 - Debt is better than equity

Fact -

It is not true that debt funds are better than equity. Both have their advantages and disadvantages and importance in the portfolio. Debt mutual funds remain stable against market downfall, while equity funds provide better returns.

Equity mutual funds also help in growing your wealth faster. The best way to choose between the two is to understand your risk appetite and make decisions based on that. Once you assess your risk profile and financial preferences, you can decide which type of mutual fund you want to invest.

For example, if you have a healthy risk appetite and are willing to invest for the long-term, you can go for equity funds. They are suitable for a long investment horizon because of their ability to recover when a market goes through a crisis. In other words, you must decide to invest in equity or debt, keeping in mind your financial goals and investment duration.

Myth 3 - Professional experts handle the money, so there is no need to review the mutual fund portfolio

Fact -That is untrue because, usually your goals, the market conditions and the economic scenario, all keep changing. To ensure that you are on the right track, it becomes necessary to review your portfolio at regular intervals.

That can also help you to prevent incurring losses. Another thing is that mutual fund professionals do not keep a look at your overall portfolio. Therefore, you can hire an advisor to help you with the same or keep reviewing it yourself.

Since most things like goals, risks, income, financial priorities etc. change with time, experts recommend revisiting your financial plan and investments at regular intervals. That also ensures that your investments align with your financial objectives at all times.

Myth 4 - Know Your Customer (KYC) Is Needed Multiple Times for Mutual Fund Investments

Fact -The fact is that KYC is mandatory for investing in mutual funds but not needed multiple times. It is a one-time process that you have to follow before you can invest in mutual funds. You can complete KYC effortlessly through a SEBI-registered intermediary.

You can also take the intermediary’s help by asking them about the documents required for completing the KYC. Even though it may seem like a burdensome task, digital banking and investment platforms like North Loop offer short KYC procedures with minimal documentation requirements.

At North Loop, we also provide exclusively paperless portals that make the job easier through E-KYC on the mobile App.

Myth 5 - Mutual Funds are for Long-Term Investment

Fact - Many of you believe that mutual funds are best only for long term investments. But in reality, it is not so. There are different investment durations available when investing in mutual funds, and you can choose one that best suits your requirements.

If you have a short or medium investment horizon, you can go for categories like short-term debt funds and liquid funds. One other option is to invest in multiple mutual funds of different durations.

That can be advantageous because investing for a long duration, say in equity funds can help you attain high returns and reach your long-term financial goals. On the other hand, short term debt funds can park your additional money and offer decent returns, compared to government-mechanised instruments.

Conclusion -

Now that we have busted all the mutual fund myths, why are you waiting? Start investing by downloading the North Loop app now.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.