Investing In Mutual Funds: 5 Mistakes You Should Avoid To Get Higher Returns

Investment

Investing in mutual funds is among one of the best options in long term investments. These funds not only offer the potential for returns that surpass inflation but also provide way to manage risk.

Short-Term Focus and Goal Ambiguity

Mutual funds are meant for long-term investments, typically 5 years or more. Dont get attracted to short-term market fluctuations. Instead, have a clear financial goal in mind, whether its retirement, a childs education, or a down payment on a house.

Inadequate Investment

Try to Invest regularly, even if its a small amount. This is called rupee-cost averaging which helps you buy more units when the price is low and fewer units when the price is high. You can set up a Systematic Investment Plan (SIP) to automate your investments.

Discontinuing SIPs and Frequent Withdrawals

Dont stop your SIPs or withdraw money frequently. This disrupts the power of compounding and can erode your returns. SIP inculcates financial discipline and helps you achieve your financial goals.

Reacting to Market Crashes

Dont panic and sell your investments when the market crashes. Market slowdowns are a normal part of the investment cycle. In fact, they can present good buying opportunities. Stay invested and focused on your long-term goals.

Chasing Top-Performing Funds

Dont chase past performance. Past performance is not necessarily indicative of future results. Focus on the funds investment objective, expense ratio, and risk profile to see if it aligns with your investment goals.