All Mutual Funds Differ! Don’t Commit These Common Mistakes

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When people step into the world of mutual fund investments, they come with a dream of earning big returns. But, in some cases, they fail to achieve growth and face big losses, due to which investments become a ‘not so good’ thing for them. Let’s find out the reasons for such failures to enhance the profitability as well as growth in mutual fund investments.

Choosing the wrong fund for the portfolio may be one of the major reasons for such losses because all the schemes have different objectives. If those objectives do not match with that of yours, the investment plan will not work as per the expectation. You must analyse the various categories and elaborate which fund suits your requirement.

1. Debt Funds: These are known for regular return generation with low-risk profile. However, this is not the complete truth, that is why people end up choosing inadequate debt plans for their investment portfolio. Do you know not all debt funds have a low risk? Yes, you heard that right. There are multiple debt mutual funds which vary in their risk profile, profitability, and duration. So, before you invest your money in any of these funds, make sure that its investment objective tallies with that of yours in all aspects.
2. Equity Fund: These funds are known for growth in the long term, and carry moderately high risk. Suppose, you have been an FD investor, but seeing a little hike in equity market you lured to equity funds. But, you have to understand that they will not work as per your expectation because their nature is quite contrary to that of your FD investments. The equity-related schemes are the best when invested with a long-term objective.

The Don’ts of Mutual Fund Investments:

• Do not go for the best available schemes all the time, rather take a plan which has objectives matching to that of yours.
• Do not go for high-yielding funds always because they also contain high-risk factors. Rather, invest in those schemes which have risk exposure matching to your profile.
• Do not time the market, as mostly mutual funds achieve growth in the long term. If you make movements in your portfolio due to frequent market ups and downs, then your investment would not be able to attain wealth objectives at the time of maturity.
• Do not diversify your portfolio too much. Over-diversification will make your profile weaker for achieving the goal as it simply doesn’t mean less risk. In fact, it would be riskier and likely to generate fewer returns.
• It might have been possible that you missed out the opportunity of participating in the market which is skyrocketing these days. In such a situation, people often feel left out and jump on the bandwagon to invest in those funds where majority of the investors have parked their funds. This may lead to losses and you may end up losing your money. So, you should always stay conscious where you are investing your hard-earned money.
• Do not reshuffle your portfolio frequently. Mutual fund investment requires patience to fetch good returns, let them attain maturity to generate high growth profits. If you change your portfolio with the frequent fluctuations of the market, then none of your investments will be able to provide you with projected returns.
• Do not invest without a plan. It is crucial to have a plan for the future, with which your investment walks only on the path of your goal plan. Various mutual fund schemes are there to achieve different objectives like a happy retirement, higher education, daughter’s marriage, or child education plan, etc., you must stay focussed on any one of them.
• Do not put all the eggs in one basket. Though it is mentioned above that over-diversification is not good, planting all the finance in one investment type is also not a wiser step. A little diversification while considering other aspects of your investment plan will work great for you.

Mutual funds are perhaps the best instrument which helps in generating wealth and meeting future financial expenses. The only thing that has to be kept in mind before investing is the investment objective. Furthermore, if you still feel that something is not right in your portfolio and is not identifiable by you, You must consult your financial or investment advisor for the best solution. You can also go with the best-recommended funds at MySIPonline which are rated by CRISIL after analysing their performances.