Investment Myths & Truth

The process, action or method of putting money for profit is called as investment. Investment can be done through "n" number of ways, one can lend out money to a person and charge interest on the principal s monthly, quarterly or annually; or one can deposit the money in banks, open a recurring deposit, fixed deposit etc. The best way to earn through investing is to harness the power of compounding; Compounding is the process where interest is earned on an existing principal amount as well as to the interest already earned. For example, you invested 1000$ which is compounded monthly at a rate of 10%, you will earn interest of 100$ in the first month(principal amount 1000$), for the next month interest gained on investment will be 110$ (principal amount 1100$ which include 1000$ original investment plus 100$ interest which was earned previous month) and so on.

Mutual Funds harness the compounding power and deliver better returns as compared to other investment. In a mutual fund, the money is collected from various investors via a lumpsum amount or SIP(Systematic Investment Plan) by the large financial institution and invested by an experienced Fund Manager(a person employed by the large financial institution to invest money on its in behalf). A mutual fund is a common pool of money into which investors investors investors investors put their contributions to be invested in accordance with a stated objective. Investors get mutual fund units, on a proportionate basis, for the sum contributed to the pool. Mutual Fund investments are believed to be easier than other investment classes, but there are some myths which obstruct people from investing. Here is a video explaining the truth related to some common myths.