Lower NAV means a better deal. Stop SIPs when markets fall. More funds mean more diversification. Sound familiar? These are some of the most common myths in mutual fund investing—and believing them could cost you both money and valuable compounding time. Let’s bust them, one by one.
We spend most of our life trying to separate myth from fact. In mutual funds, this matters more than we realise because acting on a myth doesn’t just cost you money, it costs you time too. And, time is the one thing compounding can never give back.
Most of these myths didn’t come from research. Instead, they came from a random reel, a YouTube shorts, or a WhatsApp forward. So, let’s bust them, one by one.
Myth 1: Lower NAV Means A Cheaper Fund
NAV is simply the per-unit price of a fund, which is, Total assets – liabilities / outstanding units. A Rs.10 NAV fund isn’t a bargain just because it’s Rs.10. What actually matters is the portfolio inside it, the fund manager’s track record, the strategy, and the consistency. Stop asking “How low is the NAV?”. Start asking, “What am I actually getting for this price?”
Myth 2: Stopping Your SIP When Markets Fall Protects Your Money
It feels safe at that moment, but it is not.
When markets fall and you keep investing, the same amount buys you more units. That’s rupee-cost averaging working in your favour. Stopping your SIP during the dip means that you don’t just miss the recovery; you also break the discipline that made the SIP work in the first place. This doesn’t mean invest blindly in every falling fund. It means that you don’t let fear make the decision your financial plan should be making.
Myth 3: Last Year’s Top-Performing Fund Will Keep Winning
This is recency bias dressed up as strategy. A fund that topped the charts last year is where the easy gains are behind it not ahead. Markets move in cycles. Check consistency of the fund across market cycles, downside protection during corrections, and whether the fund’s philosophy still fits where the market is headed. One good year is a data point. Not a decision.
Myth 4: More Funds In Your Portfolio Means Better Diversification
Fifteen funds sound safer than five. Usually they’re not, they’re just harder to track. If the overlap of portfolios of various funds crosses 30-40%, you’re not diversifying, you’re duplicating. Real diversification comes from spreading across asset classes, market caps, and geographies not from adding more names to a list.
Myth 5: Direct Plans Are Always Better
Yes, direct plans have a lower expense ratio. The real question when buying a regular plan is, what that extra cost buys you – it could be someone reviewing your portfolio, telling you not to panic-sell in a crash, catching a rebalancing you’d have missed, planning your taxes around your withdrawals and so on. The cost of a DIY mistake – wrong fund, bad timing, an emotional exit – is usually far bigger than the expense ratio gap. If you have the time, the temperament, and the research bandwidth, direct can genuinely work for you. Most people don’t have all three at once, and that’s exactly where guidance earns its cost.
Myth 6: Lumpsum Is A Better Strategy Than SIP
Here’s the thing: SIP and lumpsum aren’t strategies. They’re just tools for how you invest and the real strategy is what you do with either of them.
If your idea of “lumpsum” is waiting for the market to dip and trying to time your entry, you’re not being smart. Instead, you’re playing with opportunity cost. Nobody can consistently call the exact bottom. While you’re waiting for “the right dip,” the market often moves on without you.
The better approach: set your SIP right after your salary date, so investing happens before your discretionary spending takes over. When you do have a lumpsum to deploy, stagger it on dips instead of dropping it all in at once.
The Bottom Line
None of this is about reacting to the next headline, the next dip, or the next “top fund” list. It’s about asking one question before every decision: does this actually fit my financial plan? Wealth creation is never about chasing the market and timing it. It’s about staying invested in the right strategy and giving it the time it needs to work. Remember, you are not making Maggie Noodles!
If you wish to start your mutual fund investing journey with the right guidance, reach out to us!
