In the modern-day scenario indeed mutual funds are one of the promising investment options. Since it can be started with very low Investment, regular monitoring is not required, experienced and professional fund managers are there to manage them and MFs beats Inflation better than its counterparts. While an Investor needs not to do much apart from investing regularly there are few errors, which can certainly be avoided and increase his returns by a reasonable margin. Below are some of the errors committed by the investor in general:
Dividend Isn’t Always Good– Many Investors opt for the Dividend option while investing in for the long-term. This is the biggest error committed by all Investors, in general, these days. The dividend is like your own capital being returning to you and cannot ever be guaranteed. People with the bad intent promise this and an innocent Investor fall prey to it. The best for the investor is, he maintains distance from such unscrupulous elements who promises regular returns through Balanced Fund Route.
Don’t Diversify Too Much– Mutual Funds have their very nature to diversify risk, over-diversifying it will kill the returns in the long run.
Invest based on Goals– Having pre said goals in mind for the purpose you are investing is always better than doing it otherwise. Walking a road with a fixed destination in mind gives you a clear insight into your path, probable roadblocks, and solution to tackle them.
Don’t Forget Asset Allocation– Asset allocation is one thing commonly ignored by Investors. One should always keep following three stages of investingi.e. Planning, Execution and periodically reviewing your investment. One should always make a timely exit out of the overvalued asset and enter into an undervalued one.
Don’t chase Short-Term Goals/ Past Returns– Market is very volatile, following a trend here can be futile. Do not lay focus on your past investment strategies and returns. The market could have a particular set of the situation at that time which may or may not repeat in the future.
Not Knowing the Portfolio Is Not an Option– An investor must be aware of sectors, stocks, and cash levels of funds if he is investing without the guidance of accredited fund advisors.
Read the offer Documents– Mutual Funds investment are subject to market risks. Read the offer related document carefully is the tagline of SEBI IN its TV advertisement. So an investor is always advised to read the offer letter thoroughly to know all terms and conditions and clear any doubt or misconception.
Don’t look for low NAVs– Often the investors are found to be searching for low NAVs stock expecting it to be performing better than the ones with higher NAVs. Low NAVs must be studied with all the related conditions responsible for the low NAV, then it must be decided if it’s undervalued or worth not investing.