Mistakes to avoid while investing in mutual funds

Mistakes to avoid while investing in mutual funds

There are bound to be a few mistakes in the initial phase of a new venture. It is no different with a mutual funds investment. But what if you had a cheat code to avoid these mistakes? This article is merely that -- it points out the mistakes you may make while making a mutual funds investment. Let’s look at some of the common goof-ups.

1) Waiting too long to invest: The best time to invest was 20 years ago. The next best time is now. However, many people avoid taking the first step because they think they don’t have sufficient funds to invest. This is a wrong approach. With mutual funds investment plans, you can start investing with very small sums of money. Even Rs 500 is enough to get started. The power of compounding ensures that even small amounts can grow into larger sums over time. The longer you wait, the more you miss out on the benefits that mutual funds investment basics offer. Start investing early to maximise your financial returns.

 2) Panicking: Warren Buffett, the great investment guru, explains that you should buy low and sell high. However, a common mistake among investors is to panic when the market turns bearish. They dump their equity funds to minimize their losses. In other words, they start investing when the market is at a high and exit when the tide turns the other way. This strategy is the exact opposite of successful investing. It is common for the market to go through bullish and bearish cycles. But that doesn’t mean you react to these short term changes. When you invest for the long term, you should avoid panicking by continuing your regular investments month after month.

 3) Investing without a plan: There are thousands of mutual funds in the market. And each fund is designed to help investors meet specific investment goals. If you invest randomly without a proper financial plan, you can make the mistake of picking the wrong funds in mutual funds and investment for a better future. For instance, equity funds are good for long term goals but for short term goals, it is better to invest in debt funds. By creating a detailed financial plan and investing accordingly, you can meet all your financial goals at the right time.

 4) Not monitoring your funds: Investing is not an exact science. You can do a lot of analysis and pick out the best mutual funds that you hope will perform. But that may not always be the case. It is possible for funds to underperform from time to time. And you can know this only if you keep an eye on your funds. You should monitor your funds on a regular basis to ensure that they are performing up to your expectations. If not, it may be necessary to replace them with better alternatives. But that said don’t scrutinize the performance on a daily basis. The stock market can be volatile and you don’t want to worry about each up and downturn in the market. Have a proper time horizon and monitor accordingly.

 5) Stopping your SIPs: Systematic Investment Plans (SIPs) offer the best returns when you invest consistently on a regular basis. However, many investors wrongly assume that by timing the market and only buying mutual fund units at low prices, they can get higher returns. When you stop your SIP, a smaller amount of money is being invested. It is best to continue your investments to achieve Rupee cost averaging over time.


It is a good idea to invest in mutual funds. But to maximise your returns, it is necessary to avoid some of the common pitfalls. Now that it is clear you know how to avoid while investing in mutual funds, you can successfully create a good corpus to meet your financial goals over time.

Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.


4 mistakes to avoid while investing in derivatives

To err is human. To learn from these mistakes and invest better later is a sign of a good investor. Investing in futures and options is a great way to hedge your bets and make money in the stock market. However, not all investors do it correctly right from the beginning. That’s why, here is a list of mistakes you can avoid when you invest in derivative investments.1) Not having a proper exit strategyWhen the clock strikes 5:30, you know it is time to leave the office and head home (or wherever your evening plans take you). This is a proper exit strategy. Unfortunately, many investors don’t know when to get out of derivative investments. a) You need to know when to exit when you are not doing wellb) You need to know when to exit when you are doing well For example, you may have made a long call option hoping that the price of the stock would increase significantly over the strike price before the option expires. But if that’s not happening within the period, exit the option and seek better trades or long term derivatives. At the same time, know when to exit on short term derivatives when you are making a profit. Don’t wait on a profitable trade because you are hoping for the price to increase before the option expires. Stay too long and the tide can reverse at the blink of an eye. 2) Having unrealistic expectationsYes, there are a lot of traders in the market who do nothing but invest in futures and options all day. But that doesn’t mean you should quit your day job too. The derivatives segment does offer incredible opportunities for success in the financial market. But in order to avoid mistakes investing in derivatives and reach that stage, you need to gain lots of knowledge and experience. Don’t have unrealistic expectations just when you start investing. This can often lead to frustration and irrational decisions in the market. Have patience and focus on your investment goals one trade at a time. 3) Doubling up to compensate for lossesMany traders double up when the price of an asset has moved in the opposite direction. Doubling up is a strategy where the investor doubles his position in the option. This is to earn a larger return when the stock price moves to a more favourable position. Guess what, this strategy is highly risky and rarely works. At such times, it is best to close your trade and minimize your losses. 4) Lack of self-disciplineIn a stock market, the price of a security either moves up or down. But when it comes to derivatives, you can have multiple futures and options contracts on a single security. And that’s why the derivatives segment can be quite risky. One of the tips to investing in derivatives is to have self-discipline to ensure good decision making and long-term success in the derivatives segment. Don’t act on unsolicited tips or rumours in the market. Always make an investment decision after you have conducted your own research. ConclusionThe only people who don’t make mistakes in investing are time travellers. But since the technology has not been invented yet, you can be assured that everyone fumbles. But the important thing is to minimize your losses at such times. Have a proper strategy and trade accordingly. By avoiding the above mistakes, it is possible to perform better in the derivatives segment. The stock market can be an exceptional investment approach that can offer bounteous yields and help you accomplish your financial goals, through smart investments. However, if you are hesitant in diving into the stock market, as a beginner, you may want to conduct due research and avoid the mistakes mentioned above. Alternately, you could also seek the help and assistance of a certified financial professional, to best understand the approach you need to take while investing in the stock market. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Mistakes to avoid while investing in real estate

It is a truth universally acknowledged that a person in possession of a small fortune must be interested in real estate investing. Jane Austen may or may not have uttered these words but in this current day and age, it is very true. Buying a house is one of the most important milestones in a person’s life. With the boom in population and rise in prices, everyone wants to buy a property. It doesn’t matter whether you wish to rent it out or sell it at a later date. Investment in real estate offers great opportunities for high growth. However, there is a chance of committing a few mistakes when you set out in this field.Here is a list of mistakes you should avoid when you start investing in real estate and some real estate investment tips.1) Choosing the wrong locationReal estate is all about location, location, location. Sometimes, even being on the wrong side of the road can spell the difference between profits and losses. In the future, whether you wish to rent out the place or even sell it, remember that prospective buyers have a high regard for the right location. One such real estate investment options is to search for a property with the right location that fits within your budget and real estate goals. 2) Ignoring paperworkAlright, paperwork sounds boring but the truth is: it is extremely important (especially in real estate). You want to ensure that all the documents are perfectly in place. There have been many instances in the past where real estate investors were cheated because they were duped with fake documents. Read the contracts thoroughly and make sure everything is in order before you buy the property. You could also use the services of a lawyer to ensure that there is nothing wrong with the paperwork. 3) Buying the first property you seeMany real estate investors are struck with the symptom of “loving the first property they see”. This can be due to the fact that the investor is a novice or he is simply lazy. A single investment in real estate can cost lakhs (or even crores) of rupees. You don’t want to make that investment decision without looking at other options. Always check out a few properties so that you have the choice to make the best financial decision in the end. 4) Waiting too longBuying the first property is not good. But at the same time, waiting too long is not good either. When they start researching, a few investors get bogged down by the feeling that a better property or a better deal is around the corner. As a result, they wait and wait without making the investment decision. This can be harmful too. When you find a property that meets all your requirements, it is time to sign the dotted line. 5) Not saving enough for repair and maintenanceThis is a common mistake committed by rookie investors. By the time they finish the deal, they exhaust all their financial resources. As a result, they don’t have enough money for maintenance or renovations. Buying a property is one thing but if you wish to put your mark and sell it in the market, you need to factor in additional expenses. Things like furnishing the property, roofing and refitting appliances can cost a big buck and you need to be prepared to finance these expenses.ConclusionReal estate offers great investment potential but it is not a get-rich-quick scheme. In order to see profits in the market, you could pay heed to the above-mentioned mistakes to avoid while investing in real estate. You may also want to put in hard work and identify the best properties that fit in your budget. Alternately, you could also seek the advice of a real estate investment advisor. Don’t let emotions drive your decision making or you may end up paying too much for a property. Remember, you always have the power to walk away from the negotiating table if the price is too much. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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