As we start to grow up and start working, there are certain financial responsibilities that fall on our shoulders. Planning your financials is a must but that doesn’t mean all of us will be good at it from the start. To ensure the investments you make help you toward a financially secure future, you must avoid certain investment mistakes that a lot of newcomers end up making.
Listed below are some of the mistakes that mutual funds investors might end up making –
Not having a financial goal in mind is probably the biggest mistake an investor makes while investing. If you are not clear about the outcome you want, you will end up taking a decision that will do more harm. Investing without creating a goal is similar to travelling without having a destination in mind.
A lot of investors start investing without properly understanding the product or schemes. They do too little or no research of their own or sometimes just listen to the investment pundits and carry out the investments. Once you have your financial goal, the next step is to start identifying an investing plan or scheme that will help you achieve that goal. If you are new to the world of Mutual funds, take advice from professionals, acquire knowledge and start slowly.
Lack of research about a particular scheme and its past performance always leads to bad investment decisions. Your decision to invest should depend on your financial goal, risk-appetite and investment period. Ideally, you should start investing in funds that are less volatile and check the long-term returns of those funds.
If you are just out or an avid investor, investing in too many schemes at the same time is always considered too risky. A lot of people forget that each fund scheme has a diversified portfolio and that if they invest in too many MF schemes, it will become difficult to keep track of them. The best method is to select 2 or 3 MF schemes and build that investment over a period as per your financial goals.
Investing a huge chunk of your money in one go might seem like a good idea for some investors but it is not a good method. Your ability to manage market risks and to carry out asset allocation is deeply reduced if you make a lump sum investments. Having a systematic investment plan helps you invest your money periodically and optimise your returns based on the financial goals you want to achieve.
Many investors start panicking when the markets go down and take an impulsive decision to sell off their portfolio. Instead take a step back, read about what is happening in the market, talk to other investor friends, advisors or colleagues. Don’t take any steps until you have all the necessary information and have done enough research to form an informed decision.
Once an investment is made, many investors stop there and forget to keep track of their scheme performance. Reviewing your investments help you identify and weed out underperforming funds, understand the market conditions which will help you figure out the correct asset allocation in the future. Failing to review can cost you a fortune.
Never invest in schemes on a notion of “others are investing” or just because “market is Up”. Before taking any decision you have to do research, lay down your investment plan and understand the best possible schemes that will help you achieve your goals and help you grow your investments.
Best way first-time investors start their investment planning is by sorting the top mutual fund schemes in the order of higher returns. You have to do your research to understand how different mutual funds schemes work and not just select a scheme based on their past performance.
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