Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Thursday 20 February 2014

Mutual Fund Mis-facts

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on 94 8300 8300

 

 


Over the years mutual funds, with their varied offerings, have been instrumental in helping investors achieve their financial goals. However, mutual funds have also often found themselves surrounded by certain myths based on flawed beliefs and incorrect information. It is important for investors to be aware of these myths and not be influenced by them. This article is aimed at making investors aware of some prevalent mutual fund myths.

Long-term investing always pays

The importance of a longterm investment horizon while investing in equities/ equity-oriented funds cannot be overstated. But does this mean that investing in an equity-oriented fund over the long haul in isolation is good enough? Also, can there be a flip side to such an approach, that is, can long-term investing ever be counter-productive?

 

The answer is yes!


Consider the case of a fund which is inherently flawed, where the investor made a bad investment decision. Simply staying invested for the long term won’t turn the fund into a better one. The passage of time won’t eliminate a fund’s shortcomings. Moreover, staying invested for the long-haul could keep the investor from achieving his goals. Then there are funds (like sector funds, for instance) with a narrow investment universe that tend to deliver, at their best, over the short term when the underlying sector hits a purple patch. Over longer time frames, they may or may not deliver desirable results.
Hence, it should be understood that the long-term horizon in isolation doesn’t add up to much.

Debt Mutaul Funds are risk free

Since debt funds have traditionally been considered as low-risk investment avenues, the focus on their risk aspects tends to be lower. And then there are myths that make matters worse for investors. For instance, investors are known to believe that returns from a liquid fund or a government bond fund can never be negative. Let’s debunk this myth with the help of a real-life instance of recent origin.


The year 2013 saw the Indian rupee depreciating to record levels. This prompted the RBI to take measures to bolster the rupee. Some of those measures were instituted by the central bank on July 15, 2013. While these measures were aimed at deterring speculation on the rupee, they had a rather negative impact on debt markets and subsequently debt funds.


As seen in the table here, a day after the RBI announced the measures, all debt fund categories registered a sharp fall in returns.


Investors, on their part, should do well to understand that debt funds, like equity funds, are market-linked instruments. Hence, there is no guarantee of either returns or capital preservation.

Systematic investment plans (SIPs) always works

An SIP is the most recommended mode of investing in mutual funds. It entails investing a small sum every month vis-à-vis investing a lump sum. The advantage with SIP is that it enforces discipline in investing, which for an investor may be difficult to adopt in a normal course. Despite the obvious benefits, it is a myth that investments via the SIP route always deliver higher returns vis-à-vis lump sum investing.


SIP works on the philosophy of rupee-cost averaging. This means that the money invested will buy more mutual fund units when its net asset value (
NAV) is low and fewer units when its NAV is high, thereby lowering the average cost per unit over time. This strategy would typically work best during times of market volatility.


But if equity markets experience a secular bull run, the returns from SIP investing may lag vis-à-vis lump sum investing. Such an occurrence is not entirely uncommon over shorter time frames. So, to benefit from SIP investing, investors should have a longer investment horizon spanning at least a market cycle since, over the short term, markets could witness a unidirectional upward movement.

 

 

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

 

Best Performing Mutual Funds

    1. Largecap Funds             Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds         Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds          Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds   Invest Online

      1. DSP BlackRock MicroCap Fund

2.       Franklin India Smaller Companies

E. Sector Funds          Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds      Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds        Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds         Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

No comments:

Post a Comment

Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Popular Posts