Act first, question later
Most DIY investors, it seems, are in a tearing hurry. They make their investments first, and then ask for validations in various mutual fund forums. Most often the question is very simple: I have invested in xyz scheme. Please tell me whether it is a good scheme? Two things are wrong in this approach. One, the question hardly provides any personal details. Without those details, it is almost impossible for anyone to offer a comment about the scheme or its suitability. Two, the question should always be - is the scheme good for me, not whether it is a good scheme. This can be totally avoided if the questions are asked first
Highly-rated schemes don’t make a great portfolio
Most direct investors typically choose highly ranked or rated schemes. Often they choose a scheme from every available mutual fund category. This approach is flawed. You should make a portfolio based on your investment objective. Also, adding too many categories and schemes often dilutes the overall returns from the portfolio, especially when you are investing a modest sum
Taking unwanted risk
Many DIY investors knowingly pick up high risk investments like small cap schemes or sector schemes. They reason that they had to take extra risk for extra returns. However, when the schemes start losing value sharply, they tend to panic. Direct investors should remember that continuing with investments is extremely crucial to create wealth. When one picks wrong investment, it often ends abruptly. Most people stop or abandon their investments in a bad patch in the market.
Always confused
Many direct investors are not even aware why their schemes are down. Many of them do not even know that looking at mutual fund returns in isolation can be misleading. Unless you compare its performance with its benchmark and peers you can’t make any judgement about the scheme. Also, it is foolish to hope that your scheme would remain unscathed when the entire market is witnessing a blood bath.
No concrete plans
The risk profile is vague. It could be conservative to aggressive. The investment horizon is equally hazy - it could be eight to 10 years, but I may need the money soon. It may sound bizarre, but we come across many direct investors with such loose parameters for their investments. Unless one adopts goal-based investment, many new direct investors would find difficult to carry on their Investments
Unnerved by the market
A volatile market or an adverse news item can unnerve many direct investors. In the current market scenario, many of them are looking for soothing words about the potential of the equity schemes to deliver over a long period. Similarly, many DIY investors had second thoughts about debt schemes when there were a host of downgrades and defaults in the money market. Always keep in mind you would face such situations when you are investing in market-related investments. There is no way you can avoid it
Most DIY investors, it seems, are in a tearing hurry. They make their investments first, and then ask for validations in various mutual fund forums. Most often the question is very simple: I have invested in xyz scheme. Please tell me whether it is a good scheme? Two things are wrong in this approach. One, the question hardly provides any personal details. Without those details, it is almost impossible for anyone to offer a comment about the scheme or its suitability. Two, the question should always be - is the scheme good for me, not whether it is a good scheme. This can be totally avoided if the questions are asked first
Highly-rated schemes don’t make a great portfolio
Most direct investors typically choose highly ranked or rated schemes. Often they choose a scheme from every available mutual fund category. This approach is flawed. You should make a portfolio based on your investment objective. Also, adding too many categories and schemes often dilutes the overall returns from the portfolio, especially when you are investing a modest sum
Taking unwanted risk
Many DIY investors knowingly pick up high risk investments like small cap schemes or sector schemes. They reason that they had to take extra risk for extra returns. However, when the schemes start losing value sharply, they tend to panic. Direct investors should remember that continuing with investments is extremely crucial to create wealth. When one picks wrong investment, it often ends abruptly. Most people stop or abandon their investments in a bad patch in the market.
Always confused
Many direct investors are not even aware why their schemes are down. Many of them do not even know that looking at mutual fund returns in isolation can be misleading. Unless you compare its performance with its benchmark and peers you can’t make any judgement about the scheme. Also, it is foolish to hope that your scheme would remain unscathed when the entire market is witnessing a blood bath.
No concrete plans
The risk profile is vague. It could be conservative to aggressive. The investment horizon is equally hazy - it could be eight to 10 years, but I may need the money soon. It may sound bizarre, but we come across many direct investors with such loose parameters for their investments. Unless one adopts goal-based investment, many new direct investors would find difficult to carry on their Investments
Unnerved by the market
A volatile market or an adverse news item can unnerve many direct investors. In the current market scenario, many of them are looking for soothing words about the potential of the equity schemes to deliver over a long period. Similarly, many DIY investors had second thoughts about debt schemes when there were a host of downgrades and defaults in the money market. Always keep in mind you would face such situations when you are investing in market-related investments. There is no way you can avoid it
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