Three Reasons Why People Lose Money in Mutual Fund Investments

Investments in the mutual fund are spreading widely with their lucrative nature, but there are many folks who are yet not satisfied by investing in them. The primary reason behind their dissatisfaction may be the loss that they have borne on their income by investing in mutual funds, due to which they perceive it as a ‘not so good’ thing for them. But, this is not the entire scenario, you must know the actual reasons for failure in mutual fund investments so that you can skip making those mistakes.

Here are some of the reasons for this depletion are:

1. In most of the cases, it has been observed that majority of the people buy funds when the market goes up and values high. They think that the price will grow further and park their hard-earned money in the upgoing market. But, this often leads to dismay when the market either goes down or remains stagnant for years. If you avoid the behavior of investing only in the upgoing schemes and start making a regular investment as per your needs, you can easily fetch money from mutual fund investments. This can further be elaborated with an example, if a batsman hits a six in one ball, it is not certain that he will hit a six again in the next ball. But, by maintaining an average run rate, he/she intends to win the match.
2. Again, many investors instantly withdraw the investments by noticing a little fall in market trends due to lack of patience. Generally, the newly entered investors encounter this problem as they face market fluctuations for the first time. With a fear that the market may further fall, they start pulling back their money from the fund. This should not be done because it takes some time to grow a corpus in the mutual fund and you need to be patient. For example, not all the time an aggressive batsman leads the match to win. A fine defensive player can also chase the objective.
3. Many investors always keep running behind the top-rated schemes of mutual fund investments. In spite of investing in the best-ranked funds, they cannot fetch any returns rather, face losses. The reason behind is that all high-rated schemes may not match your investment goals. For instance, you have added a scheme in your portfolio which has been rated five stars by some recognised rating agency, and the fund is of equity nature, carry high-risk appetite, and of the long investment horizon. This might not be a successful investment for you because according to the style of your portfolio, you need a scheme which can yield you a regular income with low-risk appetite.

Therefore, you must have understood that why people are losing money in mutual fund investments. If you are also one of them, try reading some basic tips regarding investment strategies and make sure investing in schemes which match with your financial goals.

Not all the batsman are of same nature, some show aggression in the field, whereas some play defensively. Similarly, not all the mutual funds are of the same character as some may show you frequent fluctuations in the performance graph, whereas some may move steadily to attain a big objective over time.