5 most common mistakes that first-time mf investors make – moneycontrol. com

The advent of online investment platforms and eKYC has eased mutual fund investing for beginners. Ireland landscape This ease is encouraging many first-time investors to take a DIY (Do-It-Yourself) approach rather than depending on financial advisors for expert advice. Hillsborough fencing However, the lack of understanding about mutual funds and capital markets leads many to take wrong investment decisions. Basketball court diagram with labels Here are some of the common mistakes that first-time fund investors often make.

Hunting for low NAV funds: Financial advisors and mutual fund distributors often use the myth of ‘low NAV’ to pitch new fund offers (NFOs). Buy fabric near me By equating the concept of mutual fund NAV with that of share prices, they convince the investors that low NAV funds are cheaper. Ncaa basketball tournament scores However, this is not true. Team usa baseball NAV of a fund is determined by the value of its underlying assets and the total number of its outstanding units, and it can be high or low due to various reasons. Basketball wives season 5 A relatively new fund will have a lower NAV while an old fund with excellent performance over the years will have a very high NAV. Home design ideas 2016 Similarly, the NAV of better performing fund will increase faster than a ‘not-so-good’ fund over the same time period. Beach landscape drawing Instead of NAV, you should rather consider a fund’s past performance along with its future potential to deliver high returns. Facebook desktop icon For example, assume that you have an option of buying either of two mutual funds. Yankee stadium seating Fund A, which has an NAV of Rs 25, has delivered an annualized return of 12 percent p.a. What is irrigation system Fund B, having an NAV of Rs 15, has delivered an annualized return of 8 percent p.a. Fantasy baseball sleepers 2016 So, which mutual fund should you prefer? Obviously, the mutual fund delivering higher returns. Backyard baseball 2001 Thus, never use a fund’s NAV as a criterion to buy mutual funds.

Investing in mutual funds to earn dividend: Some distributors project dividend as some sort of a windfall or bonus earnings. Francesca battistelli tour However, what these advisors don’t disclose is that the dividend is paid out of your own investment only. High pitch mike As soon the mutual fund scheme pays dividend, the NAV of that scheme gets reduced by the amount of the dividend paid. Cultural landscape foundation For example, assume that a scheme with NAV of Rs 60 declares a 20 percent dividend. High pitched voice man As soon as the scheme pays you the Rs 2 (20 percent of face value) dividend, the NAV of that scheme will come down to Rs 58. Elevator pitch In effect, the mutual fund pays back your own money. Baseball drills at home Instead, opt for the growth option to benefit from the power of compounding.

Ignoring the investment objectives of mutual funds: Investment objective of a mutual fund determines the type of stocks and other securities that a fund manager may decide to invest in. Football scores This helps in giving you a fair idea about how the scheme proposes to manage your investment. Facebook login Ignoring a fund’s investment objective may land you with a wrong fund for your financial goals.

Over-expectation from equity mutual funds: Most first-time investors start with unrealistic expectations from equity mutual funds, especially during bull markets. Vtd softball However, returns generated during bull market are not sustainable in the long term. Espn fantasy football app not working This leads many to liquidate their mutual fund investments during market corrections or bearish market phases. Pixel pitch calculator Instead, follow a proper asset allocation strategy to achieve your financial goals. Francesca eastwood instagram As equity mutual funds are susceptible to market volatility, invest in equity mutual funds only if your investment goals are 5 years away or more. Ancestry coupon For goals maturing in 3–5 years, invest in hybrid mutual funds. Softball rules 2016 Invest in liquid funds and debt funds for goals maturing within 3 months and 3 months–3 year, respectively.

Not diversifying enough: Many first-time investors of mutual funds invest their entire investible surplus in just one mutual fund. Fantasy football team names antonio brown However, instead of putting all eggs in one basket, diversify your investments by investing in schemes of different fund houses. Florida softball roster Thus, even if a particular scheme underperforms its benchmark index or peer funds, your investments in other schemes may save the day for you by providing higher returns.

Making mistakes and learning from them are an integral part of one’s learning curve. Garden of the gods resort However, while wise men learn from their own mistakes, wiser ones learn from others’. Usssa softball tournament schedule Thus, apprising yourself of these common mistakes will save you from repeating them. Plants and flowers Identify the time period required for achieving your financial goals and invest in various asset classes, accordingly. Football field length Diversify across two or three schemes to reduce your fund manager’s risk and do not get swayed away by dividends and low/high NAVs while choosing your mutual funds.