Many myths and false beliefs about mutual funds circulate in the market. Successful investors ignore these myths and focus on what truly matters. Here are key details that give successful mutual fund investors an edge:
8 Proven Strategies of Successful Mutual Fund Investors
1. Past Returns Do Not Guarantee Future Returns
Avoid choosing a mutual fund based solely on past returns. Consistent performance over a long period is a better indicator of a good mutual fund.
2. Lower NAV Is Not Always Better
NAV (Net Asset Value) should not be the primary factor when selecting a mutual fund. For example, a fund with an NAV of Rs 13.89 isn’t necessarily better than one with an NAV of Rs 82.56. Focus on factors like AUM (Assets Under Management) and past return consistency instead. Read our blog What is Net Asset Value (NAV), and how Does it Affect your Investment returns to gain deeper insights.
3. Investment Value Can Decrease, But That’s Okay
It’s normal for mutual fund values to fluctuate in the short term. Panicking and selling during a dip means selling low. Stay invested for the long term and review your investments periodically.
4. Timing the Market Is Difficult, Keep Investing
Even expert investors struggle to time the market accurately. It’s hard to predict if the market is at a high or low. Regular investments via SIP (Systematic Investment Plan) or STP (Systematic Transfer Plan) can help mitigate risks through cost averaging.
5. Small Increases in Investment Amount Can Lead to Big Returns
Even a slight increase in your investment amount can significantly impact returns due to the power of compounding. Invest a little more whenever possible.
6. ELSS Mutual Funds Are Excellent for Tax Saving
ELSS (Equity Linked Savings Scheme) mutual funds allow you to save tax under Section 80C and have the shortest lock-in period of three years among tax-saving options. Read our blog to understand Terms Associated with Mutual Funds That You Need to Know.
7. There Are Mutual Funds for Every Need
Mutual funds cater to various investment horizons. For short-term investments of a few days, consider liquid funds. For investments of a few months to a year, look into ultra-short debt funds. Read our blog Growth vs Value Investing in Mutual Funds to learn more.
8. All Mutual Fund Companies Are Safe to Invest In
All mutual fund companies are regulated by SEBI, ensuring their safety. You don’t need to stick to only a few names. Invest in funds that meet your expectations.
