Why You'll Never Succeed at Mutual Funds Investment

As the internet era has started to rule people, we are in a situation where everything is online these days. There are people who sell fear and there are people who sell happiness, but who sell fear get more appreciation and attention than the person selling success / happiness. The Internet has become an emotional tuner.

With the help of the internet, you can book home online, you can order your favorite meal, order your dress, change your online status, work remotely etc. Even investing has become online and have multiple articles related to investing that brainstorm investors and lure them to low earning funds / ETFs.


 

Why You'll Never Succeed at Mutual Funds Investment

 

Mutual fund is a method of investing where a knowledgeable person who keeps watch on the stock market manages your funds. Pools the money from other investors and allocates them accordingly to get the benchmark returns, below are the steps that you should be considering succeeding by investing in mutual funds.

Redeeming Mutual fund units when you don’t need funds

In mutual fund redeem means withdrawing or selling the mutual fund units. If you sell a mutual fund early and you are not in need of the funds, it will cause your funds to stop growing. Investing In equity mutual funds should be planned as early as possible and should be for long term i.e. 10-20 years. If you redeem mutual funds units, the number of units will reduce, and the long-term investments returns change, and this will impact your belief in your mutual fund.

To stop you from redeeming the mutual fund early mutual fund houses have planned mutual fund early withdrawal penalty or mutual fund early redemption fee of 1 percent of the return will be levied on your investment if withdrawn within one year of investment. So, we should not withdraw whenever the market is on high or when you are not in need of money, allow it to grow to its fullest.

Forgot to invest timely / Discontinuing SIP

If you must make money using equity mutual funds you should plan to invest timely. Invest money every month and plan to automate the investment so that you will not fail to invest. Invest as small as possible like invest 500 every month or invest 1000 every month or invest 5000 every month depending on your salary.

Investing timely will average out the stock market fluctuations avoiding downside risks and gain you when the stock market is in sideways or uptrend. So you should be planning to invest in a timely manner so that your investment gets average out when the market is low, moving sideways or in downtrend.

Panic Selling / Not investing when markets are low

When the stock market goes down more than 30 percent of its value, we call it crash. We should not be afraid of a market crash; we should instead invest more during these times. Some people look at stock market crashes and stop their SIP or worry much about losing money day by day, or they sell their mutual fund units out of panic. It’s a biggest mistake and should be avoided, they sell out their complete holdings based on fear of crash. This should be reversed. Instead, we should think of the stock market crash as an opportunity and should not be afraid of stock market crash instead investing more during the crashes.

Panic selling is also known as fearful selling with the thought that asset prices will come down. When panic selling occurs most of the stock that are getting traded will get into their value, or trade in discounted value range. This is the right time to invest more.

Focusing on balanced fund

Balance fund means the type of mutual funds that are low risks and generate income by investing in equity, bond, gold and sometimes Real Estate Funds. Although these generate good return but the income they generate is less when compared to that of equity return. If you are young and good at taking risk, you should invest into equity-based schemes that are well managed. So, look for well managed equity funds and try avoiding balanced fund(if you are risk taker)

Shouldn’t depend fully on Mutual Fund Calculator

Mutual Funds Calculator is just software that predicts the future earnings based on the mutual fund benchmark return / its past performance. There are various types of mutual fund calculator lump sum available. If you invest lump sum then this will get you the future returns, and mutual fund calculator SIP will get you the future income based on systematic investment plan. If you are looking for investment you  may already be familiar with this line Mutual Fund investments are subject to market risks, read all scheme related documents carefully. One should not depend fully on mutual fund calculators as we have already seen some mutual funds closed/ not beating their benchmark returns.

 

Disclaimer : This article is an opinion of the reader and does not provide any investment advice / recommends any stock / mutual fund units. Please consult your financial adviser before investing.


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