Indian retail investors are still being misled by a familiar set of mutual fund assumptions that can quietly erode returns, especially in fast-growing sectors such as automotive, electric vehicles and mobility, where thematic enthusiasm often outruns disciplined portfolio construction. The most damaging misconceptions are not exotic market theories; they are simple errors of interpretation that lead investors to choose funds for the wrong reasons. In a market where product choice has expanded sharply, the ability to separate price from value, novelty from merit, and size from skill has become central to better investing.
NAV Is Not Cheaper
One of the most common mistakes is treating a lower net asset value, or NAV, as a bargain. Investors often assume that a fund with a lower NAV is cheaper and therefore offers more upside than a fund with a higher NAV. That logic is flawed. NAV is simply the per-unit value of the fund's holdings after liabilities; it does not determine whether the fund is expensive or attractive in an investment sense. A fund with a lower NAV and a fund with a higher NAV can represent the same underlying value if the portfolio composition and market conditions are comparable.
This misunderstanding persists because investors often anchor on unit price, much as they would with a stock. But mutual funds are not priced like individual shares in a way that makes a lower quoted number inherently better. What matters is the quality of the portfolio, the consistency of the strategy, the costs involved, and the fund manager's ability to execute over time. In sectors such as automotive and EVs, where valuations can swing sharply on policy signals, supply-chain shifts and demand expectations, chasing a low NAV can be especially misleading if the underlying portfolio is poorly constructed.
NFOs Need Scrutiny
A second myth is that a new fund offer, or NFO, is somehow superior to existing funds simply because it is new. In reality, novelty is not a performance metric. An NFO arrives without a live track record, which means investors have limited evidence on how the strategy behaves across market cycles, how the manager responds to volatility, or whether the stated mandate can be executed consistently.
That does not mean every NFO should be dismissed. Some may offer access to a genuinely differentiated strategy or a segment not well represented in the market. But the burden of proof is higher, not lower, for a new product. Investors should ask whether the fund fills a real portfolio gap, whether the investment process is clearly defined, and whether the manager has the experience to navigate both bull and bear phases. In a market environment where thematic products tied to mobility, clean energy and manufacturing can attract quick inflows, the absence of history is a material risk, not a selling point.
Size Is Not Skill
The third myth is that smaller funds always deliver better returns than larger ones. There are situations where a smaller fund can be more nimble, especially in less liquid segments or in concentrated opportunities where flexibility matters. But size alone does not determine performance. A small fund can also be under-diversified, more volatile, or dependent on a narrow set of bets. Conversely, a larger fund may benefit from stronger research infrastructure, better risk controls and a more disciplined investment framework.
The real question is not whether a fund is small or large, but whether its size is appropriate for its strategy. A fund investing in the automotive and mobility ecosystem may need scale to access a broader opportunity set, yet it may also need enough flexibility to avoid crowding into the same names as peers. Investors should therefore focus on whether the fund's size aligns with its mandate, liquidity needs and stock-selection style.
Across all three myths, the common error is the same: investors focus on surface-level signals instead of the engine beneath the hood. The most reliable indicators are not cosmetic. They are the fund's philosophy, the quality of its management, the discipline of its process and the consistency with which it has executed that process over time. In a sector-led market where narratives can move faster than fundamentals, those are the factors that separate informed allocation from expensive guesswork.
For investors building exposure to India's automotive, EV and mobility themes, the lesson is straightforward. Do not buy a fund because it looks cheap, new or small. Buy it because it has a coherent strategy, credible stewardship and a record of making that strategy work through different market conditions. That discipline is often the difference between chasing returns and actually compounding them.