10 Common Mutual Fund Investing Mistakes & How to Avoid Them | CapitalKeeper
By CapitalKeeper | Beginner’s Guide | Mutual Funds | Market Moves That Matter
10 Common Mistakes to Avoid in Mutual Fund Investing
Mutual funds are one of the most popular ways to build wealth in India. However, even seasoned investors often make avoidable mistakes that cost them returns and peace of mind. Here’s a practical guide to help you avoid them and stay on track.
1. Chasing Past Returns
- Mistake: Selecting funds only because they performed well in the past year.
- Fix: Evaluate long-term consistency (3-5 years) and fund manager record.
2. Ignoring Risk Profile
- Mistake: Investing in small-cap or sector funds without understanding volatility.
- Fix: Match fund type to personal risk tolerance and goals.
3. Not Defining Financial Goals
- Mistake: Investing without clarity on purpose (retirement, education, wealth).
- Fix: Use goal-based investing (see Goal-Based Mutual Fund Investing).
4. Timing the Market
- Mistake: Waiting for the “right time” to start or exit mutual funds.
- Fix: Use SIPs to average out market fluctuations.
5. Redeeming Too Early
- Mistake: Withdrawing after minor corrections or short-term needs.
- Fix: Maintain emergency fund separately and stay invested for target period.
6. Over-Diversification
- Mistake: Holding too many funds (10+), duplicating holdings.
- Fix: Limit to 4-6 core funds (large-cap, flexi-cap, hybrid, debt).
7. Ignoring Expense Ratios
- Mistake: Overlooking high expense ratio (1.5%+) that erodes returns.
- Fix: Choose direct plans or funds with lower expense ratios.
8. Not Reviewing Portfolio
- Mistake: Never rebalancing based on performance or goal progress.
- Fix: Review every 6–12 months, shift between equity/debt as needed.
9. Lack of Tax Planning
- Mistake: Redeeming funds without considering LTCG/STCG tax impact.
- Fix: Use Mutual Fund Taxation Guide 2025 for planning exits.
10. Following Herd Mentality
- Mistake: Investing in popular funds without research.
- Fix: Analyze fund objective, holdings, and alignment to your goals.
Internal Links for Context
- SIP vs Lumpsum – Which Method Wins?
- Top Performing Mutual Funds for 2025
- ELSS vs PPF: Tax Saving Comparison
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