MYTH & TRUTH about Mutual Funds

MYTH

1. Mutual Funds are for the experts only.
2. A Mutual Fund is an equity product.
3. Mutual Fund with Rs.10/- NAV is better than a Mutual Fund scheme having a Rs.50/- NAV.
4. Mutual Fund Investing require DEMAT A/c.

TRUTH
1. Mutual Fund investing not require expertise because you don't have to take the call on when to buy or sell shares. The fund manager will do it for you. It is his job to track various sectors and companies, and decide where to put the money you and other investors have given him.
2. When people think of funds, they think of only Equity Funds, but the truth is that a Mutual Fund is a vehicle that can carry any passenger.Equity Mutual Funds will buy shares off the stock markets and Debt Mutual Funds will buy into debt product like government bond, corporate debentures and treasury bills. The risk of each kind of fund will depend on the passenger carried by the bus.
3. Investing in funds Rs.10/- NAV or Rs.50/- NAV nothing matter on funds performance. The fact is that it is the percentage return on invested funds that matters, remains unnoticed and overlooked. For example, given a similar performance level of 10% appreciation , a Rs.10/- NAV will rise to Rs.11/- whereas a Rs.50/- NAV will rise to Rs.55/-. It's a simple truth that is neither told nor heard. In fact due to already demonstrated peformance , the chance of the Rs.50/- scheme posting the 10% appreciation is far higher than the one which has just started its innings.
4. Mutual Funds can be bought either online, either directly through AMC or through a broker; however, one can also invest offline by filling a physical form.

ONCE UPON A TIME

This is the story of Suresh, an employee with a Mumbai software firm for almost 5 years. Having spent his entire life in Mumbai, Suresh understands very less about life outside the city. However, for the past few months, Suresh has been experiencing an inexplicable fascination for farming. On his last trip, a short family vacation to Nasik, he fell in love with the idea of growing grapes and making money form the sale of grapes to processing units. So, Suresh with his limited knowledge and resources, bought some grape seeds and ventured into grape-farming. However, due to lack in expertise he suffered a huge loss. Having burnt his fingers, he told himself that farming is bad idea and no one can make money as a former........

Moral of the Story

Like Suresh, Many of us invest in financial markets with limited understanding of the truth. And then there are myths born out of failed experience and incomplete understanding which lead  us into making investments through tools that may not suit our profile. This results in forming lifelong wrong perceptions about the financial markets.

........Going back to Suresh, had he involved some more people with similar interests, and hired a professional who understands farming, then they would have collectively realized their dream of earning good returns by using the professional's expertise. This could have been done by pooling in money form members of "collective" and handing it to professionals to manage the day-to-day activities. In fact, money could have been pooled as per the value of dream. Similarly, if some people are interested for long-term investment returns, then they could pool in money for, let's say, teak plantation or mango plantation. The thing to remember is, the choice will depend on the Goals and Time-Horizon.

                                                                                  Source:AMFI booklet Mutual Fund Saving Ka Naya Tareeka

Ten Advantages of Investing in Mutual Fund

1. Professional Management
2. Diversification
3. Convenient Administration
4. Return Potential
5. Low Costs
6. Liquidity
7. Transparency
8. Flexibility
9. Choice of Schemes
10. Well regulated

Simple Steps Investing in Mutual Fund

Investing in Mutual Fund is very simple you just do these steps only

                            

• Fill Know Your Customer (KYC) form and provide (If you have not done earlier)
1. One photograph across signed
2. PAN Card copy self attested
3. Latest Address proof copy self attested
• Fill common application form and sign at appropriate place as per applicant.

• Draw Cheque in favour of Scheme name in which you are investing.
• Deposit application form along with KYC from (with required document)/ acknowledgement at any Point of Services (POS) or scheme belonging MFs Office in which you are investing and Keep acknowledgement for your verification