Myths and Facts About Mutual Fund Investments: What Every Investor Should Know

When it comes to planning for a secure financial future, most people share similar aspirations—buying a home, planning for retirement, funding their children’s education, or simply building wealth over time. Mutual funds, being one of the most accessible and flexible investment avenues, often become a go-to option.

However, despite their growing popularity, mutual funds are surrounded by myths that often discourage or mislead potential investors. These misconceptions arise from a lack of awareness and the perceived complexity of the investment world.

Let’s break down some of the most common myths about mutual funds and uncover the truths behind them, so you can invest smarter and with more confidence.

Myth 1: You Need a Lot of Money to Invest in Mutual Funds

Fact: You can start with as little as ₹1000 per month through SIPs.

One of the most pervasive myths is that mutual funds are only for those with deep pockets. In reality, mutual funds are among the most inclusive investment tools available. With Systematic Investment Plans (SIPs), even a college student or someone at the beginning of their career can start investing. A ₹1000 SIP might not seem like much initially, but over time, with consistency and compounding, it can grow into something substantial.

Myth 2: Mutual Funds Are Only for Experts

Fact: Fund managers handle the complexity—your job is to pick the right fund based on your goals.

You don’t need to be a stock market whiz to invest in mutual funds. That’s the beauty of it. Mutual funds are managed by professional fund managers who do the research, track the markets, and make investment decisions on your behalf. As an investor, your primary role is to assess your risk tolerance and select a fund that aligns with your financial objectives.

Myth 3: Mutual Funds Are Not Meant for Young Investors

Fact: The earlier you start, the better your returns due to compounding.

Youth brings one big advantage to the investing table—time. Starting young allows you to benefit from the magic of compounding, which can significantly increase your wealth over time. Plus, mutual funds are ideal for young investors who may not have the experience or resources to explore high-risk, high-maintenance options.

Myth 4: Mutual Fund Returns Are Guaranteed

Fact: Like any market-linked product, mutual fund returns are subject to risk.

We’ve all heard or seen the disclaimer: “Mutual fund investments are subject to market risks.” That’s not just legal jargon—it’s a vital truth. While mutual funds can offer attractive returns over the long term, they are linked to market performance and, hence, are not guaranteed. But by staying invested and being disciplined, you can reduce short-term volatility and ride the long-term growth wave.

Myth 5: Choosing a Popular Fund Means Better Returns

Fact: Popularity doesn’t equal performance—research is key.

A fund being popular doesn’t necessarily make it the right one for you. Fund ratings and performance can fluctuate based on market conditions. What matters more is how the fund aligns with your financial plan, how it performs against its benchmark, and whether it suits your risk profile. Always evaluate based on data, not hype.

Myth 6: All Mutual Funds Have a Lock-In Period

Fact: Only certain funds, like ELSS, come with a lock-in.

Not all mutual funds restrict your liquidity. While some funds, like Equity-Linked Saving Schemes (ELSS), have a three-year lock-in (which also helps you save taxes), most mutual funds—especially open-ended ones—allow you to redeem your investments at any time. This makes mutual funds flexible enough to suit both short-term and long-term financial needs.

Myth 7: Higher NAV Means the Fund Is Expensive

Fact: NAV (Net Asset Value) is just the price per unit—nothing more.

A high NAV doesn’t mean a fund has peaked or is “expensive.” It merely reflects the per-unit price of the fund based on its total assets. For instance, buying 10 units at ₹10 is financially equivalent to buying 1 unit at ₹100 if both grow at the same rate. Focus on the fund’s overall performance, rather than just its NAV.

Myth 8: Mutual Funds Are Only Suitable for Long-Term Investing

Fact: You can invest for short, medium, or long-term goals.

While long-term investments help with wealth creation, mutual funds can also cater to short-term and medium-term goals. Whether you’re saving for a vacation, a wedding, or building an emergency fund, there’s a fund type (like liquid or ultra-short-term funds) for every goal and tenure.

Myth 9: High Past Returns Guarantee Future Gains

Fact: Past performance is just one piece of the puzzle.

It’s easy to be tempted by flashy returns, but relying solely on past performance is a risky strategy. The markets are unpredictable, and a fund that performed well last year may not necessarily do so again this year. Instead, look at long-term performance consistency, the fund manager’s track record, risk metrics, and how the fund behaves in different market cycles.

Myth 10: You Need to Do KYC for Every Investment

Fact: KYC is a one-time, centralised process.

Once you’ve completed your KYC with any financial institution, your details are stored centrally with the CKYC (Central KYC Registry). This means you don’t need to repeat the process every time you invest in a new mutual fund, making the process smooth and investor-friendly.

Myth 11: Financial Planning Is a One-Time Task

Fact: It’s an ongoing journey.

Your financial goals evolve—new responsibilities, changing income, or unexpected life events can shift your priorities. That’s why financial planning must be reviewed regularly. A plan made five years ago may not serve your current needs. Revisit and realign your investments periodically to stay on track.

Myth 12: Fund Managers Handle Everything—No Need to Review Your Portfolio

Fact: It’s your money. Stay informed.

While professional fund managers make the investment decisions, it’s crucial for you to keep an eye on your portfolio’s performance. Life changes, market dynamics shift, and sometimes even the fund strategy may evolve. A periodic review ensures that your investments are still aligned with your goals, and if not, you have the opportunity to make adjustments.

Conclusion: Awareness Is the Best Investment

Investing in mutual funds isn’t rocket science, but it does require a bit of curiosity and the willingness to learn. Dispelling myths and understanding facts helps you invest with greater confidence and clarity. At the end of the day, your money should work for you, not confuse you.

So the next time someone tells you mutual funds are “too risky” or “only for the rich,” share the truth—and maybe even inspire them to begin their investment journey the right way.

Ready to bust more myths and grow your wealth smartly?

Start with knowledge. Stay with discipline. And let your money do the heavy lifting.

Have more queries? Let us help you get started with smart, goal-based investing. Talk to our advisor today.