We all make investments in mutual funds and thereby make mutual fund mistakes.

Mutual fund investment may be beneficial for you but risk can come in disguise.

Here,you will agree with me that there are some of the mutual fund mistakes /pitfalls that one must watch out for.

Many times we make investments but after sometime,realize that we have made a mistake. If we take care of few basic aspects related to investments than we can escape from such mutual fund mistakes.

So let’s dive in, and find out 7 mistakes/pitfalls you should watch out fo

1.Taking wrong calls

One of the biggest mutual fund mistake is a wrong investment call.

Sometimes we choose the a mutual fund scheme which does not match with our investment strategy and financial goals.

What if you take a bus to reach Singapore or take a air plane to reach to a nearby shop.

Sounds weird.

Isn’t it?

Similar is the case with mutual fund investments.

If you invest in long term mutual fund scheme for your short term needs and invest in short term mutual fund scheme for your long term needs.

You will not get the required returns and benefit in both the cases.

Your money won’t work for you in any of the case.

Therefore it is mandatory to take the right calls with regards to investment duration.

 Now if you want to know more about the right term for your investment you can watch out a video on the same topic.

and to know the time horizon of the other investments read our article 

https://bestinvestindia.com/best-investment-options-in-india/

2.Following the Heard

While making investments,we seek advice from our friends and relatives.

On finding a lucrative deal we instantly invest our HARD EARNED money without wasting a single moment.

In the heat of the moment, we even do not bother to do any research before investing.

Here one thing is to understand that your friend or relative cannot tell you about your exact requirements.

Only you and you can know your true requirements.

Therefore you should invest as per your life financial goals and Link your investments with your life financial goals and invest as per that only.

more reading : https://bestinvestindia.com/mutual-fund-guide/

3.Not getting the right advice

Unfortunately you may come across advisers who miss-sell investment products to you.

Many times due to various constraints, you are not able to understand about the cons and pros of investment product.

Thus get trapped into the investment product.

You can avoid this pitfall by opting the Right Financial Advisor for you and asking certain questions to determine whether the recommendation which is given to you is right or wrong.

Therefore, it is vital to choose a Financial Planner so that you can take the right decision for your investments.

Remember” time loss is money loss”

4 Investing in a Single Fund

 Mutual Funds are inherently diversified.

Even a single mutual fund scheme invest in not less than 60 to 70 stocks or securities.

This makes a mutual fund scheme inherently diversified.

But it does not mean that you will invest money in a single fund.

You should invest in a mix of equity debt and balance fund.

This approach not only reduce the risk but it also diversify your investments.

Here it is very essential to understand the investment classes and thereby setting your allocation.

  5 Holding your Investments when market fall

With each market crash, a panic spreads among investors.

The immediate reaction is to liquidate their investments or stopping their further investments.

But this is not the right approach.

You should consider a trough period as an opportunity because this is a period when you get your investments units at cheap price.

Moreover liquidating your investments during this phase will not only impact your return but it may charge penalties also may be due to early withdrawal.

 6 Dividend over Growth

In Dividend option, scheme profit is given periodically to investors after deduction of some taxes.

It is investors’ favorite option as they get income from their money and secondly they do not need to pay any taxes on dividends.

While in Growth option you don’t take regular income, rather you keep the money invested.

Therefore your money grows in value in growth option.

Here you get to see compound effect on your investments.

While you lose on the compounding benefit (as generated return is liquidated) if you opt for dividend and there is a heavy taxation.

Therefore you must choose growth option if you do not require a regular income from your mutual fund Investments.

7 Not letting go the Under Performers

It has been seen that people fell in love with their investment and they do not want to let go under performers which reduces their return in the long run.

It is very essential to have a Portfolio Review at least once in a 6 months so that you can exit the non performing schemes and invest in the good schemes.

Additional reading 

https://bestinvestindia.com/portfolio-review/

Conclusion

I hope you must have got some of the insights from these 7 mutual fund mistakes/pitfalls you must avoid before investing in mutual funds.

Which strategy from this post are you going to try first?

Or maybe I didn’t mention one of your favorite financial tips.

Either way, let me know by leaving a comment below right now.