investing”, in itself is pretty scary to make people run away from mutual funds. The little detail that we miss out here is that it’s a notice not to run away but be careful.
Mutual funds have now been around for quite a long time but still, the awareness about investing in them isn’t seen. When you decide to get into mutual funds or any other investment for that matter, you need to decide a goal for which you are investing. Your goals play the most vital role in planning your investment. The type of goal you have short-term or long-term becomes the deciding factor of how much and where it would be wise to invest.
There are a few common mistakes that people make on their way to make investments let’s give you a
gist of them and try to keep you away from the same trap.
1. Following footprints
It’s always a lot more easier to copy what others are doing instead of creating your own path but let’s not do this while investing, please! Your goals & ability to invest is not going to be similar to anyone’s. Most of us get unsatisfactory results by imitating someone else’s investment plan as what we aim for is different from what they do.
2. Choosing mutual funds based on their short-term rating
While planning to invest in any of the mutual funds it is better to see the graph of the fund over the years and not judge it by its performance over a year’s period. When we generally plan to invest in mutual funds, the best practice is to invest for a longer period of time and so there might be certain funds that do not show great highs in a year’s performance but are likely to have consistent results if seen for certain years collectively.
3. Investing in a mutual fund based on returns over short-term
When the market conditions are favorable, even poor-performing funds can show good results. What we need to observe before investing is whether the chosen fund performs well or at least does not underperform in adverse market conditions, if that stays true to the chosen mutual fund Kuddos, you are on the right track!
4. Choosing a Mutual Fund based on Low expense Ratios
We all like to expend little and gain more but if while choosing a mutual fund you only focus on this aspect, we are not sure that you would get guaranteed results. While low expenses can be one of the reasons to choose a mutual fund, it shouldn’t be the only reason to choose as it might not really deliver you consistent performance for your investment tenure. A pro tip while choosing mutual funds for your investment would be to align your goals, and tenure of investment with the corpus, and without getting excited about good short-term results focus on the consistent performance of the funds.