Finance

Mutual funds mistakes you should avoid

not getting the returns you expected on your mutual funds?

These might be the mistakes you are making

Every investor will have minimum expectation on the returns he might get after his investment. But sometimes the profits you get will not match your expectations. Before you go on blaming your mutual fund manager, check out the following mistakes to know how many of them are your fault.

Mistake 1: dividend is not good

Many investors go for dividend option while investing in long run. That’s one of the biggest mistake every amateur investor makes while investing. The dividend is your own capital coming back to you and cannot be guaranteed. Unscrupulous elements promise this and gullible investors end up losing in the long run. It’s in an investor’s best interest to stay away from anyone who promises sustained returns through dividends via the balanced fund route.

 

Mistake 2 : don’t diversify too much

Mutual funds are designed to diversify the risk. Having many funds in a portfolio would kill the returns in the long term.

Mistake 3: not making investment based on goals

People invest based on herd mentality, but lose focus and deviate midway during the journey. Keep the goal in mind before investing.

Mistake 4: forgetting asset allocation

It’s important to keep valuations in mind. One must sell an overvalued asset and shift to a fairly/undervalued asset. The three important stages of investing are planning, execution and then reviewing the investment periodically. And these hold true for mutual funds as well.

Mistake 5: chasing short-term or past returns

An eye on the past may not be the best way to choose the future, especially in investing. For what was true in the past will not necessarily be so in the future. Choosing a winner is more important than looking at last year’s winner.

Mistake 6: not knowing what is in your portfolio

An investor must know the sector or the stock or cash levels of a fund if investing directly without the help of an accredited fund adviser

Mistake 7: not reading offer document

A plenty of information is available in the offer document such as management and expense ratio, which gives insights into the fund.

Mistake 8: hunting for low NAV

Often, investors look for low-NAV funds like finding cheaper stocks thinking that they would perform better than the ones priced higher apiece. Low NAV is not an indication for future highs , know more about on what you are investing, not only NAV.

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