Mutual funds allows its investors in creating wealth through the power of long-term compounding. As per a recent data by AMFI (Association of Mutual Funds in India) it was seen that the mutual fund business has added around 9.74 lakhs of SIP (Systematic Investment Plan) accounts almost every month on an average this fiscal year (2018-2019), that has an average SIP capacity of approx. INR 3,200. Furthermore, almost 2.5 crore SIP accounts have been recorded through which investors are recurrently investing in Indian mutual fund schemes.
Regardless of this trend, returns through the mutual fund investment are not certain because of the lack of knowledge among the populace and also the undisciplined methodology followed by them. Below is the list of two major mistakes to be avoided by an individual while investing in mutual fund:
- Make Long-term investment plan without Hasty Decisions
Wealth creation needs investment in the right set of securities with a lot of patience despite of the ongoing fluctuations happening in the market over the period of long terms. Moreover, any kind of hasty investment decisions that are not lined up with the investment plan should be avoided. Thus, financial goals should actually be detailed thoroughly so as to choose the appropriate investment schemes. Furthermore, investment through SIP is the best option if planning something for long term as it enables averaging out the market volatility.
NAV (Net Asset Value) irrelevant Methodology of Fund Comparison
Some of the investors, especially the beginners’ generally look at NAVs while choosing the fund, this is actually a wrong way used by people. Low or high NAV does not matter while comparing a fund as what actually matters is the portfolio of the particular mutual fund and the how is it run by the fund manager. For instance, there are two different funds available one with NAV of INR 100 and other with NAV INR 1,000 but are having same portfolio. In such a case both of these funds will deliver exactly same return, as the securities they hold are same. Thus, comparing a fund with the NAV price is completely a wrong idea.