We have the potential to become millionaires through mutual fund investments! However, earning a crore can be difficult due to unknowingly making small mistakes. That’s why it’s essential to be aware of the following points and apply them in our investment strategies.
Investment is the best tool to combat inflation and enhance our living standards in the future. There are various types of investments, but experts recommend mutual funds as a solid option.
One main reason is that mutual funds allow individuals to invest even tiny amounts. This flexibility has led to a surge in popularity among middle-class individuals in India who are now saving and investing.
Despite this growing interest, many people need clarification about mutual funds, leading to common mistakes.
Here, we will discuss some critical mistakes to avoid in mutual fund investments, which can be valuable in breaking free from the middle-class trap. These tips will benefit your investment journey.
Mistakes to Avoid in Mutual Fund Investments:
Choose the Right Mutual Fund: There are various types of mutual funds, each with a different level of risk. Assess your risk tolerance and make investment decisions accordingly. Before investing, carefully examine the ‘riskometer’ of the mutual fund.
Always Choose a Direct Plan: One of the investors’ biggest mistakes is choosing a regular plan without realizing it. Regular plans involve brokers or agents who take a commission from your returns, leading to higher expense ratios.
In contrast, direct plans have lower expense ratios, significantly impacting long-term investment growth. Be mindful of this choice!
Track Your Fund Performance: Investing in mutual funds is not a one-time action; you must regularly track their performance.
Returns can fluctuate, and experts advise holding your investment for at least three years. If you receive satisfactory returns, consider maintaining the investment or exploring other options.
Increase Your Investment Amount: Starting mutual fund investments with smaller amounts is perfectly fine. However, it would help if you gradually increased your investment over time to capitalize on market growth.
For instance, if you begin investing Rs. 3,000 per month at a 12% return rate, your investment could grow to Rs. 1.05 crore in 30 years. If you increase your monthly investment by 10% yearly, your total could exceed Rs. 2.6 crores over the same period!
Note: This information is for educational purposes only. Always consult a financial advisor before making any investment decisions.