Investment Planning is very important to secure your future. With a proper investment plan, you can easily meet your financial goals and build a healthy corpus. But there are some common investment mistakes that act as an obstacle towards your future planning. You must plan your investment portfolio in a smart way and must practice some habits to avoid any investment mistakes. It is wiser to learn from other’s mistake rather than you committing them. So, here we will have a brief outlook on 7 common mistakes related to your investments.
Investing without a plan
Going for investments without any planning is like gambling with your hard-earned money. You must plan your financial goals, the expected time to reach the goals before any kind of investments. A full-proof investment plan includes- your risk appetite, how much money you need to invest and tenure of the investment. Creating wealth and meeting the investment goals are possible only through a disciplined investment plan.
Investments without any research
For mutual fund investment in India, you must research on it. You need to study the past performance of mutual fund investment plans, fund manager’s past record and also the history of the fund house. Your financial goal must be in sync with the investment style of the particular fund. For detailed investment research, you must look at a minimum of 5 to 10 years of mutual fund performance
Risk appetite not matching with the investment plan
An ideal investment plan always takes into account your risk-taking capacity. If you are a risk-lover, then you can easily go for an equity mutual fund investment plan. Whereas a risk-averse individual should ideally invest in debt funds. Though there are other important factors that affect your investment plan. Understanding your risk appetite and then investing helps you to gain the utmost from your investments.
Inflation is a vital part of mutual fund investment plans. Usually, people forget that inflation can easily reduce their financial corpus. When you are calculating the expected return using a mutual fund investment calculator, you must include the inflation. So, you must invest in a way that, the inflation will not reduce your investment corpus.
Emotion Driven Investments
Rational investment decisions must be the driving force for any mutual fund investment in India. But generally, people invest and redeem it based on their emotions. If you get greedy during the bullish market, then you will raise your investment. During the equity mutual fund investment in the bearish market, if you get scared, then either you will stop your investments or will redeem it. But you must not take your investment decisions based on your emotions. Your investments must be regular and disciplined.
No Diversification of Investment Portfolio
Your investment portfolio must be diversified enough to help you achieve your expected return. When investing, you must invest in a mix of equity and debt funds to meet your financial goal. Investment Portfolio diversification means, you are investing in different mutual fund schemes with different risk profiles. This will help you to leverage the losses of one fund with the profit of other funds. But over-diversification is not recommended. You must have a maximum of 6 mutual funds in your investment portfolio.