Traditionally, we have always understood the importance of savings and investment. With a household savings rate of 30%1, Indians have historically shown a proclivity towards savings. Despite this, mutual fund penetration in the country is on the lower side and stands at 11% of GDP2. While there can be myriad factors that contribute to low penetration of mutual funds in the country, one of the primary ones is a lack of understanding about mutual funds. Below, we dispel some of the myths associated with mutual funds.
Myth 1 - Mutual Funds are only for the long-term
It is a myth that mutual fund investments are only for long-term investors. There are different types of categories viz., equity, debt, hybrid, Exchange Traded Funds (ETFs), Fund of Funds (FOFs), etc. that offer the investor a variety of schemes with different investment objective investing in instruments with different time horizons, risk profile and investment strategy. Debt mutual fund schemes allow investors to invest for as minimum as a day whereas equity mutual schemes are to be considered for different long term investment horizon. There are mutual fund schemes that invest in short-term instruments and then there are schemes that invest in equities which are considered ideal for long-term horizon. Between these two, investors have a host of options to choose from, ranging from overnight to 10-years plus.
Myth 2 - You require a large sum of money to invest in mutual funds
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