Skip to main content

Big Mistakes Mutual Fund Investors Make

Mutual Funds have gained huge popularity in recent years as evident from the fact that between 1st April 2016 and 31st March 2018, 2.32 crore folios have been added by mutual funds. The Assets under Management (AUM) of the industry increased from Rs 14,21,952 crore to Rs 21,36,036 crore during this period. That is a growth of 50% in two years, no mean achievement!


A number of steps taken by the regulator, SEBI as well as by the industry body AMFI and by the various Asset Management Companies and the distributor community have played a great role in the growth of the industry. One can safely say we have reached a point where most people with investible surplus have started considering mutual funds as a serious investment option. In this context, it is important to keep in mind some of the common mistakes that investors make while investing in mutual funds.


It is All About Equity:

Many people have the mistaken belief that mutual funds are all about equity. The fact is that there are a number of debt schemes that can offer superior risk adjusted returns over short and medium term. In fact, if one is investing for a period of say, one year, it might make sense to invest in a short term fund or a liquid fund. The average returns from liquid funds over a one-year period could be superior to what most other fixed income instruments give. In fact, for those who wish to invest the money for less than three years, a fixed income fund might be a very good choice.


Timing the Market:

Many investors have the tendency to wait for the 'right' time to invest in the market.  This is a futile wait. As far as equity mutual funds are concerned, the right time to invest is when you have the money and the right time to sell is when you need the money or when you have achieved your goals. Equity investment is for long term investors i.e. people who can wait for five years or more. During that period, most equity funds are likely to give reasonably good returns. If you wait for the right time, you are very likely to miss out some good opportunities.


Hunt for the Best Performing Fund:

Investors and even many distributors, often base their selection of funds on past performance. The fact is that funds that performed well in the past need not perform well in future. For example, an equity fund which has given the best performance for a one year period may not give the best performance over a five year period. Conversely, a fund which is ranked first over a 10 year period may be ranked last over a one year period. Nobody can predict correctly which funds would give the best returns in future. The important thing is to have faith in the market and stay invested. Your advisor would be able to recommend a good fund from a fund house that follows a robust and disciplined investment process.


Trying to Do It Yourself:

With the advent of Direct Plans, many investors have started choosing the funds on their own. On the face of it, direct plans are cheaper because they have a lower expense ratio than regular plans. While this may work well for experienced and knowledgeable investors, vast majority of retail investors would benefit significantly by taking the help of a good advisor. It is important that every investor makes investments keeping mind his/her financial goals, risk profile, expected cash flows etc. Selection of a scheme has to be done on the basis of a proper financial plan. The choice of a wrong scheme can lead to a bad experience for the investor and may even keep her away from mutual funds for a long time. A good advisor can make a huge difference to your fortunes!


Knee-jerk Reactions to Market Movements:

Many investors tend to invest in mutual funds, especially in equity schemes, when the market is on a bull run. Similarly, they also tend to redeem their investments when there is a fall in the market. Both are harmful. As mentioned earlier, investments should be made on the basis of a well thought financial plan and it is important that one sticks to the plan. Ups and downs in the market are common and one makes money by staying invested for the long term. 'Time in the market' is certainly more important than 'timing' the market.




SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

Good time to invest in Infrastructure Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...

Mutual Funds: Past Performance is not just everything

Many a times your agent / distributor / relationship manager tries to push you some mutual fund schemes by enticing you with a typical sales pitch…"Sir, this scheme has generated 20% returns in the past one year." And this sales pitch often gets louder when the market conditions have been favourable. Some of the agents / distributors / relationship managers have another unique way of luring you. They say, "Sir / madam this scheme has been awarded the best scheme award in the past by a leading business channel"... And hearing all these sales talks you investors very often get attracted and sign a cheque in favour of the respective scheme.   But please ask yourself do you hear these sales talks when the capital markets turn turbulent? Why is it so that your agent / distributor / relationship manager avoids talking to you during turbulent times of the capital markets and doesn't boast about returns generated by the respective funds or awards being conferred on t...

TDS Rate and Personal Account Number(PAN)

    The TDS rate doubles to 20% from 10% if you fail to mention your Personal Account Number   IF you run a glance through your pay slip, you will come across something called TDS, which is tax deduction at source. In most cases, the employer deducts this amount at the time of payment of salary itself and pays the total tax amount to the government on behalf of all the employees. If you are a self- employed or practicing professional s, you have to pay this amount yourself.    Tax deducted at source is one of the modes of income tax collection by the government. Under the income-tax laws, income tax at specified rates is required to be deducted while making certain payments.    The rate of deduction of tax at source on interest and rent payment is 10%. For salary payments, the employers deduct income tax at source on a monthly basis after computing income tax liability on estimated annual taxable income of the employee. Tax benefits on housing loan, investments, etc are consid...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now