Even as the asset management companies (AMCs) try to push investors towards investing in mutual funds, there is some hesitancy. Have you heard someone say that he has lost money in mutual funds? Are you wary of investing in these financial products?
It is time to rethink because you may be missing huge gains by not investing in mutual funds. Here are five fears that you may have about investing in mutual funds.
It is possible that you may not completely understand mutual fund investments and stay away from these. Traditional fixed-income securities such as fixed deposits (FDs) and insurance are easily understood and therefore preferred. This ignorance may make you wary.
However, AMCs are increasingly using promotional campaigns to create awareness and help investors like you overcome their ignorance and averseness to mutual fund investing.
- Failure to understand intricate details
Starting a mutual fund investment is not simple and requires you to understand several procedures. Each scheme has certain investment philosophy, riskiness, and other intricacies. These may be difficult for you to comprehend making you wary.
Mutual fund houses are addressing this issue by educating potential investors about mutual funds and their workings. Furthermore, you may refer to online research to understand the intricate details and make the right investment decisions.
- Ambiguity of returns
In the last 20 years, equities have delivered 11% returns. These have increased to 17% over the last ten-year period. Most fixed-income plans like FDs and bonds are unable to match these returns. Equity mutual funds deliver the best returns over the long-term; however, there is certain ambiguity about the potential returns making you wary of starting a mutual fund investment.
AMCs provide daily updates on the Net Asset Values (NAVs) of their various schemes. Furthermore, online resources enable you to compare the past performance of various mutual fund schemes offered by the different fund houses. Using these to overcome the ambiguity in potential returns is recommended.
- Impact of market volatility
It is possible that you are risk-averse and do not want to expose your investments to the market volatility and price fluctuations. It is a common misconception that all mutual fund schemes are equity-oriented plans and subject to the market volatility.
However, mutual fund houses offer different types of schemes such as debt plans and hybrid plans. These achieve the balance between risk and returns to ensure your investments are safe. AMCs also offer fixed, gold exchange-traded, and short-term debt funds. When the markets are volatile, adopting a disciplined investment approach with a mutual fundSystematic Investment Plan (SIP) is beneficial.
- Poor past performance
You may often base your investment decisions based on recommendations from your relatives or friends. It is possible that if one of them has suffered a loss through mutual fund investments, you may be wary of investing.
However, you must analyze the primary cause for such losses. Your investment decision must be well thought out and not an emotional choice. Simply because someone you know suffered a loss, you may also lose money is not the right way of thinking.
How mutual funds offer you to invest money in a secure way?
With the power of the Internet, you search online for any product or service you may require. Marketing strategies have evolved and today social media marketing is the norm. If companies had not evolved with technical development, globalization would never have occurred. Similarly, you must understand the intricacies on how to start investing in mutual funds. Here are three things you may do before investing in mutual funds.
- If you are investing for the first time, you may consider investing in a debt fund to understand how mutual funds work
- You must understand the various risks associated with different mutual fund schemes and how these react during market volatility
- Comprehend the various benefits of investing in mutual funds such as liquidity, professional fund management, well-regulated by the Securities and Exchange Board of India (SEBI), and ability to invest in larger projects
Ease of starting a mutual fund investment online
Technology has made life easier. You may start investing in mutual funds online. Here is how to start investing in mutual funds online.
- You may open an account within a short period and complete the know-your-customer (KYC) formalities, digitally
- Avoid cumbersome documentation or long meetings with your relationship manager
- Buy and sell mutual fund units through a secure payment gateway
Angel Wealth understands that each investor is different with unique requirements. Its proprietary ARQ investment engine comprehends your financial needs and risk appetite to offer personalized mutual fund recommendations. This artificial intelligence-based investment engine analyzes more than a billion data points to offer customized recommendations without any emotional bias or human intervention.