Debtmutual funds are one of the most trusted instruments within the financial market. They help you hedge against market volatility while offering stable returns and also keep your liquidity intact. But alas, many new and a few old investors still carry a bunch of misconceptions about this instrument that we’re here to bust.
If you’re contemplating investing in debt mutual funds, here are the 3 most common misconceptions you must ignore at all costs.
Myth 1# Only financial experts deal with debt mutual funds
Many individuals think that people with a deep market understanding are the ones who do well with debt mutual funds, while the rest lose money. This is an absolute farce! The whole point of investing in the market through debt mutual funds is so even a beginner can take advantage of this instrument.
To this extent, you always have an experienced fund manager picking out the debt papers in a debt mutual fund, which you can select based on how it’s rated. Sure, it’s always recommended that you read up on the types of debt mutual funds and track their historical performance. But, none of this requires expert knowledge of financial markets.
Additional Read: How Debt Mutual Funds Benefit in your Portfolio
Myth 2# You require a lump sum to invest
Wrong! Instruments like Systematic Investment Plan or SIP offers an indirect way to invest in debt-linked mutual funds with as little as a few hundred rupees every month. So, if you just want to get a taste of the mutual fund economy before diving into the deep end, invest a few hundreds or thousands every month in a SIP.
Once you start gaining confidence, you can invest in more SIPs with higher amounts or directly invest in debt-mutual funds that come in all values.
Myth 3# They are similar to equity funds
Sure, debt mutual funds fall within the umbrella of mutual funds, but they are not similar to equity funds. Debt funds invest a majority of their corpus in debt-linked fixed income securities, such as corporate bonds, treasury bills, government securities, and other money market instruments. These funds offer stable, moderate returns and mitigate investor risk.
On the other hand, equity mutual funds invest their majority corpus in stocks, shares, bonds, etc., of different companies with varying market capitalisations. If you’re looking for drastic capital appreciation and are willing to stomach some risk, equity mutual funds are your go-to.
So, debt and equity funds are the two most commonly invested mutual fund categories but are significantly different from each other. And prudent investors choose both types of mutual funds to diversify their financial portfolio.
Additional Read: Important Tips to Pick Top-Trending Mutual Funds
The bottom line
We hope we’ve debunked some of your debt mutual fund myths on time! If yes, then what’s stopping you from investing in them? Perhaps, you’re looking for the right investment partner. In that case, turn to Tata Capital Moneyfy app.
We offer a user-friendly digital portal that lets you instantly compare and invest in different types of mutual funds, including debt funds, along with SIPs starting at just Rs 500 per month.
So, here’s your chance to grow your wealth with the help of Moneyfy. Get started today!