People rarely lose money in mutual funds because of one terrible decision. It is usually a handful of small habits that add up. Here are the ones we see most often.
1. Chasing last year's best performer
A fund that topped the chart last year is often in that spot because one theme or sector had a great run. That is not a promise it will repeat. Look at consistency over five years or more, the fund's risk level and how it fits your goal.
2. Stopping the SIP when markets fall
A falling market is exactly when a SIP buys more units for the same money. Stopping it at that point means you only invest when prices are high. If you are worried, review the fund, not the habit.
3. Owning too many funds
Ten funds do not mean ten times the safety. Many of them end up holding the same companies. For most people, three to five well-chosen funds are enough, and they are much easier to track.
4. Investing without a goal
If you do not know what the money is for, you will probably withdraw it at the first temptation. A goal with a date attached keeps you invested through boring and nervous periods alike.
5. Ignoring costs
Expense ratio, exit load and taxes all affect what you take home. Direct and regular plans differ in cost, so know which one you hold and why.
6. Checking every day
Daily movement is noise, especially for long-term goals. A review once or twice a year is usually enough, unless your goal or income changes.
7. Mixing insurance and investment
Plans that promise both cover and returns tend to do neither job well. Keep protection in a term plan and growth in investments.
Mutual fund investments are subject to market risk. Please read all scheme-related documents carefully before investing.
FinMighty TeamInvestment, loan & insurance advisors, JaipurThis article is for general information only and is not personalised financial, tax or legal advice. Please see our Disclaimer.
