Top 5 Lessons for Mutual Fund Investors from 2018

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2018 has been an eventful year which has wind up just a few days ago, and thus it’s indeed an excellent time to reflect on the investment principles that the turbulent markets in 2018 have reminded us of. It wouldn’t be wrong to call the past year an emotional roller-coaster for investors in both national as well as international markets. However, it’s very rightly said that knowingly and unknowingly, our past disappointments guide us positively and/or negatively in our present-day journey of life, based on how we see and use the lessons from our past.

Not surprisingly, many mutual fund investors are uncertain about where to invest. We, at MySIPonline, believe that following the investment principles outlined below will stand you in good stead during the turbulent times and especially for the years ahead. Let’s begin with the learning!

1. Know Where You’re Investing in

Several mutual fund investors have faced huge disappointment in the past year because they invested with little or no knowledge of the product. When one doesn’t know where the destination is, it is useless to start a journey. Mutual funds offer several products that might or might not suit every investment objective. When investing for the first time, people often just take high returns into consideration and invest. However, they are unaware of the risk associated with the scheme, thus when the market experiences a downturn, all they do is panic and do away with the investments. This drags them to even more losses.

To avoid all such cases any further, just learn about the plan that you’re opting to invest in and match it with your personalized investment goal.

2. Solution Lies in Topping Up

Done with the SIP investment and thinking what next? Well, there are better ways to boost your investment corpus by not just a few lakhs but even by crores. How? Well, you just need to put your annual salary increment to work. Although SIP itself helps you to invest in regular intervals, it doesn’t imply that the investment amount should be kept constant throughout the tenure. This step-up facility with your SIP can create a dramatic effect on your long-term goals.

3. Mutual Funds: Detangled

With the introduction of re-categorization and rationalization of mutual funds, the investors will now have clarity about choosing schemes as per one’s investment style, risk profile, and needs. SEBI’s step has helped to narrow down the confusion of multiple options under each category in the past year. Thus, investors who weren’t clear about where the fund is investing its assets will now be investing with more transparency.

4. Know What Not to Do

They say precaution is better than cure. Absolutely true in the case of mutual fund investments as well. We’ve already discussed the importance of learning where you’re investing in, however, it is even more important to know about the things one should avoid while investing. Here are a few quick points that will help you know what not to do when investing in mutual funds:

• Ignore your financial goals
• Try and time the market
• Chase high returns
• Invest in too many schemes
• Ignore the risk profile and asset allocation
• Investing all money in one go

We hope the above-listed points will help you to know what not to do when investing in mf schemes. Further, as an investor, you’re expected to keep track of your scheme’s performance from time to time. It makes sense to conduct a periodical review of all your investments and weed out the underperformers, if any. Failing to rebalance your portfolio can cost you a fortune.

5. Diversification Is Always Important

Diversification is one of the most essential things which is related to investments, especially when it is mutual fund investment. Let’s understand its vitality by taking an example of a cricket team. It’s impossible to even play a cricket match with only batsmen or bowlers in the team. In fact, even the same type of batsmen and bowlers will not serve as a great team. This is because, in a cricket match, a team requires a different set of skills to perform exceptionally.

Similarly, when it comes to investments, diversification mitigates risks and allows your portfolio to perform better. Most investors believe in asset allocation across different categories to achieve diversification. While that is one way to look at it, investing in mutual funds can diversify your portfolio in an ideal manner. This is the last but one of the most important lessons from the past year that one should remember.

The End Tale

“Mistakes are inevitable; the important thing is to stay humble and learn from them.” To tide over the volatility of the market, it is crucial to understand the risk, avoid mistakes from the past, and invest in a disciplined manner. We hope this little piece of writing can help you learn some important points which you can imply in your upcoming investment in the year ahead. Just watch your investments, if you have given it enough time and still it is underperforming, then it’s time to switch to a better alternative. For any advice or suggestion concerning mutual funds, connect with our experts at MySIPonline.

Is a query concerning regular funds causing you sleepless nights? Well, here is your answer! Just mention it in the form provided below and unlock the solution right from the expert’s desk.

Also read:

• Best Multi Cap Funds to Invest in 2019
• Top Mutual Funds to Invest in January