InvestorQ : InvestorQ-Ask,Answer & Share All About Finance!
Tanya Mehta made post

What are the hidden terms & conditions of buying mutual funds?

Answer
user profile image
Priyanka Singh answered.
9 months ago


Most investors believe mutual funds would provide them with fantastic returns and invest with wrong expectations. Mutual fund companies make investors think that investing will reduce their future risks and help them cover their expenses.
These companies make ads that do not disclose full facts about the investments and due to hidden information customer falls for the investments.

For example, there is an ad that says: STAY INVESTED, Your mutual fund investments need time, just like your relationships. To support this claim it says, Remaining invested in equities has given up to 5X* growth over 10 years. There is always a * with such statements and in this case, it is: *Based on an average of 10-year daily rolling returns, Equities have grown by 5.4 times! Also, the obligatory Past Performance may or may not be sustained in the future.

Also, with every mutual fund scheme comes a disclaimer that says “Mutual funds are subject to market risks, please read all scheme related documents carefully. However, there are many investors who do believe that this disclaimer can be overlooked while making investments through these fund managers. This is exactly the situation here. Investors would latch on to cherry-picked past data and build incorrect expectations. They are guaranteed to drown in them.