Top 5 Mistakes to Avoid when Investing in Mutual Fund Plans

1 Forgetting to Analyse your Risk Appetite before Investing

  • Choose type of Mutual Funds based on Risk Appetite
  • Avoid increasing the Risk factor in the future
  • Invest in both Equity & Debt-based Funds to create a Balance

2 Not aligning your own Financial Goals with the Mutual Funds’ Goals

  • Choose between a Long or Short term Investment, based on your requirements
  • Note if the Mutual Fund Scheme is Open or Close-ended

3 Creating Over-Diversification or No-Diversification

  • Choose One to Two Mutual Funds of same type every year to avoid Over-Diversification
  • Don’t Invest in just One Fund as it increases the chances of Loss in the Future

4 Ignoring the Tax implications on Mutual Fund investments

  • Mutual Funds are subject to Short & Long term Capital Gain & Dividend Distribution Taxes
  • Choose the Growth, Dividend payout or Dividend re-investment options based on applicable Taxes

5 Failing to Track your Mutual Fund Investments from time to time

  • Re-balance your Portfolio if your Risk Appetite, Financial Goals or Time Frame is not being met
  • Replace under-performing Mutual Funds whenever Re-balancing your Portfolio

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