Mistakes To Avoid As A First Time Mutual Fund Investor

The market would have scaled to historical peaks this coming year. But this should not be the only reason why you should invest in mutual funds best tax saving investments. Just take a deep breath and figure out the reason why you are investing in the first place. If the answer to this question is to achieve a common financial goal then you are on the right track. Just take consideration to the fact that you should go on to invest in equity based funds if you have a horizon of 5 to 7 years. At the same time you should have the capacity to tolerate volatility in the stock market. If the above boxes are ticketed you should go on to invest in an equity profile that matches with your investment type.

Do not stick to schemes just because they had a creditable last year.

Some of the investors go on to focus on market indices there are people who focus on short term returns. You are likely to come across investors who come up with obscure schemes and they pick them based on a single year of performance. The sad part is that these investors realize their mistake when they interact with a financial expert via an online platform. In addition they are also aware that getting out of a recently brought scheme is going to evolve additional cost. If you go on to sell equity investments before a year, an investor is entitled to pay a short term capital gain tax.

Take into consideration your risk profile

Most investors bet big on small cap schemes. They are of the opinion that they are going to be rich quickly.  In no way it would mean that they are going to repeat the same performance year after year. If this is the case they are only going to suit investors who are having a higher tolerance for risk. A conservative investor may abandon the investments in a hurry. Clearly assess your risk profile and choose an investment that outlines your risk bearing capacity.

In ELSS do not invest more than the required amount

The concept of ELSS is ideal for a first time investor. But in no way it would mean that you are going to invest the entire money in them. The advisors of mutual funds would confer the fact that many investors have gone on to invest more than the required sum in ELSS related schemes. The benefit of ELSS is only up to 1.5 lac under section 80 C of the Income tax act. Once this slab is reached there is no more deduction that is available.

To rebalance the portfolio, book profits are some terms that may confuse the  first time investors. Some of them fall into the trap of following the advice. According to new investors of mutual funds they should take view of the fact that these advice are not meant for them. For existing investors these advice might be useful.

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