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Mistakes to avoid in Mutual Fund Investment

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OFTEN there are several conditions that result in an investor making a wrong decision about mutual funds. This is especially true when the going is tough. This can result in a financial impact that can lead to several problems for the investor including losing out on an investment opportunity that would otherwise have been taken.

It is important for every investor to ensure that they do not make big mistakes while investing and here are a few of them that they can avoid.

Quick change of funds:

Often investors are in a big hurry to change the mutual funds that they hold in their portfolio. They are always on the lookout for new and better opportunities, but there need not be such a condition followed at all points of time. Once a particular fund has been selected then there should be specific reasons why the fund should be changed.

This will ensure that there is a basis for making any decision that will affect the investment that is present with an individual. There are times when investors do not wait for the expected conditions to play out and want to see results immediately, but this is not possible under all circumstances and hence, there has to be an element of care on this aspect first.

Changing a fund in the portfolio does not always help and in many cases it would have been better if the investor had stuck to the original fund over a longer time period.

Investing in a hurry:

There are times when people have money so what they do is that they want to put this all away in some investment in the shortest possible time. This often leads to a situation where there is a lot of hurry in trying to complete the investment process. This might not work out well for the investor under all circumstances because of the fact that the concentration of investment would result in the returns being dictated by the position in the markets at the time of investment. This is especially true if there is some equity related investment and hence, there has to be a conscious effort to ensure that the time period of the investment has some relevance to the asset class where the amount is being invested as well as the specific condition of the investor.

Lack of patience:

Ensuring that there is an adequate level of confidence maintained in the investment is a key point as far as any investor is concerned. One of the key areas where investors take a hit is that they do not have patience with their investments. They want immediate action and by doing this they fail to realise that they do not understand the nature of the capital markets. The markets take their own time in performing especially equity markets and it could be years before which there are some gains seen in the investments.

This leads to a situation where the investor does not have patience with the actual investment and they expect it to start showing results once they have it in their portfolio. But they need to realise that the real value in an investment comes when the amount is invested at lower levels when the going is tough and then there is an improvement allowing for the value to capture the situation in terms of the appreciation in value, which will be sharp in this case.

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