Mutual Fund SIP | Are you losing money on investing in mutual funds? Follow these tips to avoid loss
Mutual Fund SIP If you want higher returns from mutual funds, then investing in equity funds is more beneficial. Investment in equity funds is done in the stock market but the risk is higher because investment in equity funds is directly linked to the stock market. If you invest in mutual funds through SIP with a long-term goal, then you are more likely to get higher returns, but in some cases investors in mutual funds are also likely to suffer losses. When the SIP portfolio in mutual funds starts incurring losses, sometimes especially new investors get scared and start selling units or withdrawing the entire investment, but this can spoil your financial planning and keep you behind the goal. If you are losing, then instead of panicking and selling units or making wrong decisions, first try to get your returns back on track so that your goal can be achieved.
Be patient and don't be afraid.
Keeping your mind calm and patient even when facing challenges is the first step to a successful investment. The stock market has its ups and downs which are seen from time to time but in the long run the market has always given good returns and in the short term the price goes up and down due to volatility. While volatility can cause short-term losses to mutual funds, you can get positive returns in the long term.
Don't take a hasty decision to sell.
You may incur short-term losses in mutual funds during a downtrend but don't book your profits. In most cases, a 1% exit load is applicable on equity mutual funds redeemed before one year of investment. Most believe that mutual funds can be withdrawn when their value falls, but the results are not good. SIP frees you from market timing. You also get the benefit of rupee cost averaging to buy more units when the market is down.
Compare Fund Performance
If you are getting negative returns, compare your scheme with other mutual fund schemes in the same category and other categories. If you find that your fund is performing slightly less than the best rated fund, you will not need to switch funds. If there is a significant difference in performance, consult an advisor before switching.
Identify market trends
If we talk about equities, the fluctuations in stock price are due to general market trends. Compounding works for you when you are on the right side of the trend, be it a rising or falling market. So, the first step is to evaluate the actual trends of the market, you have to identify whether the market is in a bull trend or a bear trend. Then invest in the same trend.
Diversify your portfolio
Diversification is also very important for successful investing, so when investing in mutual funds, the emphasis is always on diversifying the portfolio. For this, consider looking at different categories of funds and adding multicap and flexi cap to your portfolio.
Disclaimer : Investment in mutual funds and stock market is based on risk. Before investing in the stock market, consult your financial advisor. tezzbuzz.com will not be responsible for any financial loss.
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