Common mutual fund mistakes to avoid:
1. Investing Without Purpose
Different mutual funds have different investment objectives and features. Before deciding on your Mutual Fund scheme, it is essential to define your
financial goals clearly. Objectives can vary from saving tax, buying a house after a specified period, retirement planning, child education etc. Defining and mapping out a precise goal before investing in mutual funds will help you to know the tenure and decide how much money you need to invest in which scheme and in which.
2. Lack of Research
With so many mutual fund options in the market, it is always a good idea to do proper research before choosing one. Also, knowing the type of fund, exit load, historical returns, asset size, expense ratio, etc., along with having a fair idea about your risk-return profile, before investing your savings in a scheme, is equally important. That’s what’s important. It is always better to use authenticated resources, such as Scheme Information Document (SID), to study and research the fund in which you are planning to invest.
3. Unrealistic Expectations
If you are a first time investor, you may have high expectations from the schemes in which you invest. Mutual funds certainly have the potential to give you high returns, but you need to be aware of market volatility and have an overall picture. long term trends
4. Ignoring Risk Appetite
Like any other investment medium, mutual funds also involve some degree of risk. It is important to first evaluate your risk appetite. Each mutual fund comes with a risk gauge that tells you how risky the investment option is. Knowing and understanding the scheme riskometer enables you to analyze your risk tolerance before making an investment decision and enables you to try and match the right investment option for you.
5. Investing Without Emergency Fund
The primary mistake that many people make is to invest their entire savings in a single scheme. Therefore, during emergencies, you can withdraw money from a plan that was earmarked for a specific goal. Therefore, investing in an emergency fund is a must. It is a fund on which you can come back in times of emergency or for unforeseen and unplanned scenarios. An emergency fund cannot be built overnight, but is done gradually. Every month, set aside a specific amount in a separate bank account that can grow into a significant amount that you want to cash out during emergencies.
6. Investing in Too Many Funds
Diversity And spreading the investment is an important step, as it reduces the overall risk of the portfolio. But that doesn’t mean you should diversify your profile more. Buying multiple funds can reduce overall risk, but it can also hide the fact that you may have too many underperforming funds in your portfolio.
7. Long Term Vs Short Term Strategy
It is better to have a long term strategy and mindset rather than a short term strategy. It is important to have a long-term growth strategy and mindset when investing your hard earned money. Investing for a more extended period of time and having the discipline can be extremely rewarding.
8. Not Diversifying Portfolio
If you are investing your money in a mutual fund, you are putting yourself at a lot of risk as you may suffer losses if the company/sector/assets concerned do not perform. If you are willing to get satisfactory returns on mutual funds, then diversification is important. This will help spread out your risk and enable you to offset any loss in one fund with gains from another.
9. Not doing regular monitoring
You need to review the performance of your portfolio from time to time so that they can be aligned with your financial goals. Periodic appraisal of funds is essential to monitor the health of your portfolio and ensure that it is not made up of funds that are not performing well over a long period of time or funds that are exposed to any type of risk in the current market. can come in contact with.
10. Avoid making impulsive decisions
This is a complicated mistake that you should avoid before investing in any mutual fund. You should not make an investment decision under the influence of someone you know or know without understanding or having complete knowledge about the fund. Also, impulsive decision making and opting out should definitely be avoided in the event of a market crash. With regard to the fear of losing the principal, you may sell your mutual fund scheme before reaching its goals. Therefore, it is important for you to be comfortable during market corrections and monitor the fund’s performance for some time before taking any decision.
Understanding and understanding the nature of various investments
risk and return Relationship is one of the essential factors that influence investment decisions. Having an in-depth knowledge of different types of investments and their expectations is the key to a good investment portfolio. Once you have invested in a specific mutual fund scheme, give your investments enough time to reap their returns and track them carefully.
Disclaimer:
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www.icicipruamc.com/note
To know more about the process to fulfill the Know Your Customer (KYC) requirement for investing in mutual funds. Investors should deal only with registered mutual funds, details of which can be verified on SEBI website
https://www.sebi.gov.in/intermediaries.html
For any queries, grievances and grievance redressal, investors may contact the AMC and/or Investor Relations Officers. In addition, investors can also file complaints on
https://scores.gov.in
If they are dissatisfied with the proposals made by the AMC. The SCORES portal allows you to register your complaint with SEBI online and view its status later.
Mutual fund investments are subject to market risks, read all the documents related to the scheme carefully.