INVESTING BLUNDERS: NEVER DO THESE FIVE FOOLISH THINGS

When it comes to doing something well, there are two kinds of activities in this world. One, where you have to do the right things, or you will not succeed. And two, where all you have to do is avoid doing the wrong things, and you will succeed

- Dhirendra Kumar

Fortunately for all of us, mutual fund investing falls in the second category.

So am I saying that making money couldn’t be any simpler? That’s right, All you have to do is ensure you don’t do the wrong things, and you’ll make lots of money! Of course, that doesn’t mean that one can just read a list of ‘dumb things mutual fund investors do’ and start investing.

Thinking about these things, understanding the logic and internalising it is just as important.

Here are the five dumbest things mutual fund investors say, think and believe in. These are great ‘negative lessons’, and avoiding these alone will make you a more successful investor.

1 Trading in mutual funds is profitable

In other words, timing. Far too many mutual fund investors try to time the markets. We see this whenever the markets start rising and mutual fund NAVs head for new heights. Most investors are happy when this happens, but there’s always a substantial minority who are stressed out. Why? Based on my observations, these tend to be more knowledgeable investors who manage their investments more actively. In situations like this, these investors are often sitting on large amounts of cash funds that are uninvested or are recently redeemed. The reason? They are waiting for a ‘dip’ in the markets before investing. They feel (or more likely, have been advised) that the markets are overvalued and are ripe for a fall, and therefore, must wait for an opportunity to enter.