Mutual Funds are very simple to understand. So at times, investors prefer to select their funds on their own. They might be able to select the best of the funds, but they do make some common mistakes which ideally an advisor can help them to avoid.

 

Let’s look at them one by one:

To Look At Short Term/Recent Performance of the Fund:

It’s very easy & common practice. Looking at the recent performance data of the fund, investors get attracted to invest in it. Completely forgetting that past performance is not the guarantee of the future one! There are various reasons for a fund’s performance. Depending on the market cycle or the trend, a type of strategy works in that situation. But an investor needs to look at the future and his time horizon. Best is to estimate the next set of potential strategies. Avoiding it can turn into a disaster.

 

Not Considering Risk Factor of Fund Strategy:

Often the risk factor is hidden behind the recent performance. A wise advisor can help you identify those risks and help you avoid it as much as possible. There are two factors here, market cycle and investor’s risk appetite. It is better to take help of an advisor to avoid this mistake. 

 

Getting Attracted to Fancy Thematic Funds:

Investors get lured to trendy thematic funds based on market outlook given by experts and fund managers. It might turn out to be a high return strategy but the amount of the risk involved might not be suitable for the investor. 

 

Duplication of Portfolio:

Having too many funds in a portfolio does not serve any purpose to the investors. Careful observation of an advisor can help to avoid this mistake. These duplications are at many levels i.e. strategy, category, stock, etc. 

 

Not Selecting Fund Based on an Investment Goal:

Goal is more important for the investor then fund selection. Even If the investor does not get a chance to invest in a top performing fund. If his goal is well defined, he will be able to get expected rate of return with relatively less risk. 

 

To know more about Mutual Fund selection and to invest you may call us on 9879956949 or email us at hardik@niveshplanner.com.