5 MF Myths You Should Know/MF Myths Busted

Myth No 1

There is a lot of documentation required.

1. MF house, MF distributor or advisor, bank help you with KYC and requirements needed to kick off your MF investments.

2. Invest Online through MF Website, CAMSMFU, etc …….

Myth No 2

You need a demat account for MF investments.

  1. All MFs can be bought without a demat account.
  2. Demat Account is required to buy MFs that are listed on the exchange.

 

Myth No 3

It is difficult to exit MF Investments.

  1. All open ended MFs can be sold on any working day.
  2. Redemption can happen online, MF office or registrar office like CAM’s and Karvy.

 

Myth No 4

You need a big amount for investing in MFs.

  1. You can start an SIP with an amount as low as rs 500.
  2. You can do a lumpsum investment with an amount as low as Rs 5000.

 

Myth No 5

MFs are meant for the long term

Types of Debt Funds : –

1. Liquid : 1 – 90 days.                                    2. Ultra Short Term : 3 -6 months                   3. Short Term: 6 – 12 months

4. Medium Term : 1 – 3 years

Dividend in Shares & MFs, Different Stocks

Returns : Appreciation in its value dividend.

Profit Reinvestment: Increase in Intangible Value of the company.

Dividends are gains over and above the stock value.

Increase in stock price.

for ex: Buy a stock for Rs 70 and then it increases to Rs 100.

Dividend = Rs 10 / share

DDT = 20 % on dividend amount.

In hand dividend = 10 – 20/100 * 10 = 10 – 2 = Rs 8

Mutual Funds

Equity: Dividends are tax-free for MFs, investors, both.

Debt: Dividends are tax free for investors but DDT(28.84%) has to be paid by.

for ex:

NAV(Net Asset Value) = Rs 100

Dividend = Rs 10/unit

New NAV = Rs 90

Before Dividend Distribution,

100 units = Rs 100 * Rs 100 = Rs 10 K

After Dividend Distribution,

100 units = Rs 100 * Rs 90 = Rs 9 K