Mutual Fund |
April 30Mistakes while investing in Mutual Funds and How to avoid them
Investing
without any goal is just like traveling without any destination. So, invest
with an aim to attain your financial goals.
Making your first big investment can be
a daunting task, and quite an exciting too at the same time. It is common that
investments in mutual funds are probably the most well-known and trusted
investment options out there. In any case, when cash is involved, one should be
extra cautious.
Many times, investors can end up with
money-related issues just because they invested in a mutual fund without
understanding completely the ramifications of what they are doing. As the
financial year begins, many of you might be planning to make new investments,
and are looking for better mutual fund plans
to add to your portfolio. Yet, there are a few things that you, as an
investor, must know before making an investment.
Here’s a
look at 5 mistakes you must avoid while looking
for investment plans in mutual funds.
Investing without a financial goal
Decide on your financial
goal thoroughly and then invest appropriately. You have to decide on
your goals, whether they are short-term or long-term.
This, further, helps in setting up your investment portfolio. For example, if
you are of 25 years and planning for retirement at the age of 60. Then, you
have 35 years left.
In this case, you should invest in the
equity asset class as they outperform all the asset class over the long term.
Since retirement planning is a long term goal, you need not worry about the
market unpredictability in the short term.
Investing without a budget
Maintain a strategic distance from investing in
mutual funds without having a fair idea of the budget. Investing without a
budget plan can make your life dangerous. You can sensibly utilize the yearly
reward or endowments, assuming any, notwithstanding the month to month pay in
common assets.
Thus, it is imperative to make and adhere to the
financial limits every month with the full order to accomplish your long term
goals.
Investing without understanding risks
Often people get influenced by the profits they get
on mutual funds and make an immense investment on it without really evaluating
the profile risk. Assume that you are reluctant to take risks, then one can
avoid financing in equity funds as they are unpredictable in nature.
Risk-averse stakeholders can invest their money in debt funds as they are less
risky and provide stable returns.
Selling investment in a bear market
The constant fall of the market can
make you tense as a mutual fund investor. With such a bearish trend, you would
be enticed to reclaim your funds. All you need is to remain calm. Always keep
financial goals in mind and don''''t get over concerned by bearish and bullish
market trends. Every bear trend is accompanied by the bull, which results in
the market recovery from the lows as helping it scale another pinnacle.
Ignore SIP in mutual funds
This is another big blunder which one
needs to avoid. step-up Systematic Investment Plan (SIP) is much the same as
running a race where an individual will improve on speed as well as distance
constantly. Thus, on account of mutual fund investment, it is expected that one
individual will enhance one''''s SIP as per the increase in
salary.
However, various investors don’t raise
the mutual fund investment amount as per the increase in their salary. Step-up
SIP can be defined as the slow increment in the SIP sum automatically in a
predefined rate and period.
Final Thoughts
Therefore, by avoiding the
above-mentioned mistakes while investing in mutual fund plans, you will
be a successful investor. Do you have any query? Or, you want to share your
success story? Then, do share with us in the comments section given below.