Common Mistakes in mutual funds investment

Common mistakes in mutual fund investment

Mutual fund is the best option available to create wealth in long term. The beauty of this product is that the investor can generate wealth in long term through systematic investment even if investor have no knowledge of financial market and do not have much time to track the market. In India, the people still have not much knowledge about it. Today we will talk about some points to understand when you decide to invest in mutual fund.

• Avoid invest in the NFO (New Fund Offer) only for that it has lower NAV value. NAV value is irrelevant only growth is important. NAV value derives from scheme’s investment like share or bond. It is true that you can get more units investing in NFO but the over of period NAV growth is important not its initial value.

• It is misconception that higher NAV has become overpriced so you should invest in lower NAV schemes. The growth potential of NAV is depend on the portfolio where the fund manager have invested the fund. So instead of NAV value, your focus should be on the fund’s portfolio and investment style.

• Do not trap in thematic or sector fund as it is high risky funds. Although it have growth potential but the performance of the fund only depend on the particular sector or theme. For example many of investors have trapped in infrastructure funds or reliance natural resources fund have given the poor return as compare with other diversified or bluechip fund’s scheme return in the last 5-6 year. It is advisable that you should avoid or invest very less portion of your saving according to your risk appetite in these types of funds.

• The near term good performance do not guarantee for long term performance. Your criteria to choose the fund should not only the near term performance. The scheme should perform in all market cycle with compare with its other same category schemes.

• If you have invested in mutual fund for long term wealth creation then dividend is irrelevant for you. As the value of NAV adjust against the declared dividend. If you do not need money in regular period then you should avoid dividend option. Although the dividend is tax free in investor’s hand but it comes in investor’s hand after deducting the dividend distribution tax.

If you want more information regarding investment or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in