Mutual Fund Investments Myths And Mistakes

Myths and mistakes in mutual fund investments

SIP known as Systematic Investment Plan is a very beneficial and wise savings scheme that allows investors to make small savings plans that brings in high returns. This is a very affordable scheme since investors can deposit small amounts of money instead of lump sum amounts.

These small investments can fetch high returns over a period of time. This type of savings can increase your wealth affordably without affecting any monetary commitments. However, when you plan to invest in the SIP/mutual fund scheme you should be well aware of certain myths and mistakes that most people make. This article will provide you a few of these myths and mistakes that you should avoid when making an investment.

Mistakes to avoid

Avoid making high investments – if you are single you can afford to invest higher but on the other hand if you have a family it’s advisable to invest small amounts so that your other financial commitments are met.

Do not make a one year investment – depending on the fluctuation in the financial market it is always better to make an investment for a minimum of 2 years at least to reap better benefits.

Do not discontinue when markets fall – since the financial market has its falls, there is always a time when it can pick up once again. Hence, when the market rate falls it’s better to get more shares when the rate is low.

Invest and let your dividend grow – most SIP investors are in the habit of withdrawing the dividend got from their shares. This actually does not help in the long run. On the other hand, if you keep you dividend untouched your final benefits are doubled.

Now for a few myths that can be very misleading when you are planning on an SIP investment.

Myths that should be overlooked

A large sum is required for investment – this is not the fact since SIP/mutual funds can start with a minimum of Rs.500 and then you can keep adding more money monthly, quarterly, half yearly or yearly.

Buying on top rated mutual fund shares for higher returns – though most investors are looking for ways of increasing their wealth, looking for top rated shares is not a good idea. The fluctuating market scenario can topple any high rated company. Hence it is advisable to short list a few companies and check its performance over a period of time. Then decide where to invest.

A demat account is essential for mutual fund investors – this is purely a myth as this demat account is not necessary. You just have to fill in the application form, attach your cheque and submit the application in the SIP office or to any financial advisor. The rest will be taken care of easily.

This article will surely have given you an insight on the myths and mistakes that people believe and make when planning to invest in mutual funds. This type of investment is a great way to save your money for the future. You don’t have to start with lakhs of rupees; anyone can start saving with a minimum amount of money.

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