InvestorQ : What Is The Biggest Mistake make by the lumpsum or Sip investor?
sara Kunju made post

What Is The Biggest Mistake make by the lumpsum or Sip investor?

sara Kunju answered.
3 years ago
The biggest mistake that Mutual Funds investors made is to invest in a manner that is not aligned with their goals. Ignoring the goals while investing in mutual funds is the biggest mistake that can be done and it is like traveling without a destination. The idea of mutual fund investing is to move towards the long term financial goals.

The mistakes that are made by mutual funds investors are summarized below:
Mutual funds investor invests in too many schemes thinking that they are diversifying their portfolio and forgot that mutual funds itself are a diversified portfolio of securities.In general, Mutual funds meant for generating wealth in the long run. But investors redeem their investment in the short run if their portfolio is not generating returns. Mutual funds are highly profitable if investors hold their units for a longer-term. Many mutual funds investors prefer to sell their investments in a bull market or when their units appear overpriced. 

Investors while investing in mutual funds focus too much on equity schemes. Mutual funds have more options other than equity funds like Debt Fund, Liquid Fund, and Balanced Fund. Investors tend to focus more on equity funds alone and ignoring other options.

Investors focus on returns while investing in mutual funds and ignore the risk. While the focus on return is essential, but more focus is required on risk than on returns. At the end of the day, you control risk and no returns! An investor by investing a lump-sum in mutual funds tries to catch the bottom of the market, knowing that it is a hard task. Even in SIPs, investors try to increase the amount when the market falls and reduce the amount when the markets go up. This type of active management cannot help in achieving the objective. In the long run, as in SIP Investments, time matters more than timing.

Do it yourself (DIY) investing sounds quite exciting but as an investor, don't try to do everything yourself. The investors are advised to review their funds’ performance over a while. A crucial mistake that many investors commit is to lose patience. When you lose patience, you are forced to make short-term decisions that do not get with your long-term goals. In mutual fund investing it is the time that works in your favor and not the timing.