Expectations vs. Reality in understanding about mutual funds

The term “Investment” is so fortunate and positive even for the person who has an idea of the reality of the investment market and its insights. When the term investment comes into the mind of an individual, the relative thoughts that fluctuate in the spirit of investor is the myth about the investment that investment always generates profits, but the reality is far different from it.

People’s expectation about the investment is always the profit scenario in the investment, but the reality of any truth is that profit, and the losses always go hand in hand. Investment can generate profit at the same time it can also make losses.

Past results are said to be the mirror of the performance of a particular stock, but many other factors affect the performance of the particular stock such as economic, geographic, political, international factors. There are many associated factors which can influence the performance of the particular stock in the negative figure though the past rests of the stock were always in positive.

Before looking up top mutual funds, and investing in them, an individual or the institutional investor should always be aware of the real reality of the mutual fund investment market. There are many expectations of the people about the mutual fund investment that differs from the ground reality of the mutual fund investment market. Some of them give bellow.

  1. Expectation: The stock market always goes up

Reality: People have made up their mind about the stock market that it always goes up in any situation, but the ground reality of this expectation does not support in 100%. The fact if we see the stock market rate as a whole for a long run, we find that the stock market index for a particular exchange as a whole went up in two different points of time. But when we analyse the reality of the stock market rate of an individual stock performance, we find that the price of a particular stock may go up or down depending on different factors such as demand for a specific product, economic crises, political influence on the specific industry or much more. So we can say that the stock price of the particular stock does not always go up and may fluctuate slightly ups and down.

  1. Expectation: Rate of return in mutual fund to be 10 or more

Reality: The expectation of the people of the performance of the mutual fund is somehow set that the return on the mutual fund will be 10% or more. This type of expectations may be set because of the past performance of particular stock, but the reality is not as it is shown, there are different factors associated with the performance of stock in the market such as

 Economical Factors

Geographical Factors

Internal structure of the economy

External structure of the economy

Demand for the particular product in the market

Government behaviour towards the particular industry

Availability of the substitutes of competitive product in the market

  1. Expectation: Management of investment activities is simple

Reality: This is the thinking of some people that investment management is the easy job to perform, but the real picture of the situation is that the investment management is the tough job for any professional; people are required to look into the different outside and inside factors which are affecting the performance of a particular stock. Mutual fund investment managers are so trained into their job but still required to have a close eye on the daily basis performance of a particular stock, government policies, market trends and technological factors. So we can say that managing the stock is not an easy job.

So, the new investors are advised to be straight and search full enough to know the insights of the particular stock regarding their past performance but do not relay 100%, but also keep on searching for the plan of industry, government behaviour about the stock and industry and much more.

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