When it comes to handling finances one is always committing mistakes. The first mistake is when we fail to realize that we have better opportunities in the market to make money than just saving it all in a bank or an FD. Second is when we actually start investing. We end up taking those wrong impulsive decisions. Here’s a list of few mistakes of mutual funds that we tend to commit as first-time investors.
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1. Trying to do it by yourself
Everyone’s secretive about their finances. This secrecy leads to the first mistake. We tend to do everything by ourselves. Investing in mutual funds is not an easy task. There are widespread funds available for us to choose from. Investing in any fund based on recommendations from any source is something that is not advisable. The recommendations are surely not wrong but what best suits one person may not be a perfect fit for the other. So it is advised to take help from an advisor. There are multiple online platforms that help you with it. Make use of the resources available.
2. Hunting for best fund based on performance
Choosing funds just based on performance is a big no-no. There are other factors to consider like consistency in performance, fund manager, portfolio, investment strategy etc. All these matters when one decides to invest in a mutual fund. Performance is not the only criteria for choosing a mutual fund to invest.
3. Timing the market
Waiting for the right time to invest in a fund is pointless. When investing in equities for a long-term timing the market is useless. Rather investing in equity mutual funds through SIP is best recommended. SIP investing has many benefits like reducing the average cost of investment, inculcating financial discipline and earn higher returns.
Putting eggs in different baskets is what all say when it comes to investments. Diversification is the key to investing and it’s true. One has to diversify their investments. But over diversification must be avoided. Investing in a maximum of 5 funds spread across various market segments and management styles is ideal.
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5. Not investing based on goals
Goal-based investing is ideal for mutual funds. Having a goal allows investors to answer simple questions like the amount needed to achieve the goal, in how many years and what’s the current cost of the goal. This, in turn, helps us decide the SIP amount, investment horizon and funds to invest. Not investing based on goals is kind of useless to invest.
6. Getting excited to market ups and downs
The most common mistake among all investors new or old is they lack patience. Getting excited about the market ups and downs and investing impulsively or redeeming without thinking due to a fall in the market is something that everyone does. Patience is the most important thing when it comes to investing in any asset. It has to be more when the asset is equity. Patience is the key to high returns. SIP and long term investing is the ultimate key to creating wealth.
Avoiding these mistakes will help mutual fund investors make the most out of their money. At Scripbox we help you in building an ideal portfolio that best suits you.