1202809 SIP myths you must know!

Mutual funds are a good way, especially for young investors, to gain experience in the stock market while avoiding the effects of ups and downs. Mutual funds are suitable for investors with a variety of investment goals and allow everyone to create a unique investment strategy.
But this does not mean that there are no shortcomings. Mutual funds also have many limitations and shortcomings. Before investing in them, one should definitely know these things-

First, there is no guarantee of returns, there is also risk. Mutual funds are affected by market fluctuations. Hence, there is no guarantee as to how much return will be received. Net asset values of equity mutual funds keep changing constantly, as the prices of shares in the fund change. Therefore, mutual fund investors should understand that there is market risk in their investments too. To minimize the overall risk of investing in mutual funds, it is better That you invest in a leading and well-diversified equity fund, that falls in the low-risk category. Not only this, one way is that you can invest in hybrid mutual funds instead of equity funds because they have lower risk.

Secondly, Fees and Costs
Mutual fund investors get very good returns but they also have to pay a huge fee for this. Due to this,  the average return of their fund reduces over a period of time.
Whether the fund is performing well or poorly, you have to pay this fee. When a fund is not profitable, it means that the investor incurs losses instead of returns due to fees. So, before investing in any fund, you should compare the fees of different funds.

Third is the Problem of overlapping of shares. Overlapping means that you have invested in many funds which have the same shares. These are funds which have invested in the same 5-10 stocks <Alpha 9 out> and when these stocks fall, the returns of all the schemes fall.

Therefore, instead of focusing on one industry, one should invest in mixed type funds which focuses on different sectors.

Fourth is Lack of clarity:
Many times it is not clear what the objective of a mutual fund is. In many cases the marketing of the fund is misleading the very name of the mutual fund scheme is an attempt to lure potential investors. Therefore, if you are investing in an NFO, then look carefully at its prospects and fine points. The investor should get complete information about what kind of scheme he is investing in. Madhuban Finvest Founder Deepak Gagrani says that Investors should ensure that the tenure of a fund matches the actual tenure of their own investments.

Also, investors should focus on getting the information they need about the fund and planning an investment path as per their financial goals. Mutual funds can be a great way to invest your savings in the capital market but keep in mind that they also have shortcomings.

Invest in funds or themes that are expected to outperform,  based on emerging macro or other specific trends in the economy. Along with this, keep the target for returns practical.