These days it looks like everyone’s gotten into the spirit of investing, and age doesn’t really matter. From the young to the old, people are looking for the best ways to utilise their funds to achieve the goals they have set for themselves. However, there are still many misconceptions people have about investing in India. Here are five of the most common myths about investing that you should definitely remember:

• Equity and mutual funds only meant for long term savings:

Many people are lured by the power of compounding and believe that the longer they keep their money in equity or a mutual fund, the more it will grow. While on average, these routes have done well in the long term, there is no guarantee that they will always work out. Since returns on equity and mutual funds are not fixed, they do not necessarily harness the power of compounding. In this case, fixed income instruments are particularly useful for conservative investors who want assured returns. 

• There are no risks investing through SIP:

A lot of new investors make the wrong assumption that the benefits of making contributions through a systematic investment plan (SIP), like rupee-cost-averaging, completely eliminates the associated risks. While SIP can definitely mitigate risk, it can’t get rid of it altogether. The returns you get from SIP primarily depends on the funds you invest in; these don’t aren’t fixed. Furthermore learning discipline through SIP is not just about understanding the value of patience, but also how to make informed decisions with respect to where to invest, and when to cash in those investments. It is recommended that SIP contributions are made towards attaining particular goals, and not continuing indefinitely. 

• Investments are only a tax saving instrument:

Some people believe that investments are only for those looking to claim deductions in their taxes. However, people who have undertaken financial planning know leveraging tax efficiency made available through investments is just one part of a much bigger framework geared towards achieving the goals you set for yourself. So don’t just think investments are tax saving tools, remember that through proper financial planning they can be utilised to accomplish a  diverse range of things.

• Provident fund contribution is enough for retirement:

The most common mistake people make while planning for retirement is believing that the amount they get from their Provident Fund (PF) contributions will be enough to sustain their post-work life. Most experts put a target corpus for retirement at 20-30 times your annual income at the time of retirement and your PF alone is not sufficient to meet that estimate. When it comes to retirement planning, always remember: starting to save earlier is better; never forget to account for inflation; and make contributions apart from your PF in equity, annuities, etc. to meet your target amount. 

• Investing is not for everyone:

While it is true that the same method of investing might not work for everyone, this doesn’t mean that it is not for everyone. Good financial planning entails preparing a comprehensive statement of your long-term goals, and developing a savings and investing regimen to achieve them. Since there are no restrictions on what goals people can have, there are no predetermined categories for who can use investing as a means to achieve them. 

Finally, even though working with a professional financial advisor may not be necessary in today’s digital world, it is recommended as an option for new and part-time investors; who may not have enough experience or time to ensure that their money is in the right place. So now that you know the common misconception and myths about investing, you can ensure that you don’t make the mistake of believing them on your quest to become a successful investor. What are you waiting for, if you haven’t started investing yet, don’t put it off any longer!