When Your Mutual Funds are not in Line With Your Investment Profile

Mistakes While Investing in Mutual Funds

With the number of open-end funds across the globe reaching the mark of 110,271, it goes without saying that the mutual fund market worldwide is on the rise with investors taking an interest in using various schemes based on their individual financial goals and investment profile. At times, some of the investors end up taking the wrong decision, and choose the wrong mutual fund scheme that doesn’t match their individual investment profiles.

As a consequence, they are bound to leave the schemes and discontinue the investment process halfway. In addition to it, there are other complications that might make things worse in terms of long-term financial goals. Here’s everything you should know.

• Complications during the time of market meltdowns

Most of the investors tend to overlook the importance of choosing an ideal mutual fund scheme based on their individual risk profiles. This, as a result, can make things complicated for the investors during the time of a massive market meltdown. Panic buttons won’t come into play at that time. During the time of a market fall, the risk associated with the Mutual Fund scheme tends to hit a new high. And that’s when the investors get anxious on realizing that they are probably not ready to take the risk.

Actionable Point:  It is advised that investors should consider assessing their financial goals, income and future possibilities of further revenue closely before choosing a mutual fund scheme. They can participate in risk profile assessment quizzes and choose a scheme based on the result or the estimated outcomes of the evaluation.

• A poor market survey and overconfidence can spoil the sport

This is yet another gravest of all mistakes that the investors tend to commit when it comes to choosing an ideal mutual fund scheme, in line with their investment profile. Mutual Fund schemes are anything but simple. I mean it might just appear to be an easy scheme to opt for; being hasty with their decisions and skipping market research might ruin the game in the future. In order to enjoy high returns on investment, many investors tend to skip the importance of conducting thorough market research and risk assessment, and eventually end up being stuck in a gridlock.

Actionable Point: The idea is to remain calm and composed, and conduct thorough market research, because chances are always high that your investment profile will not remain the same in the near future. And there’s also no guarantee that the mutual fund you have bought is going to be the same for an entire lifetime. Funds might get merged, could be sold to other fund firms, the manager might change, and likewise. So, it is always advised that the investor should consider assessing all market risks thoroughly and decide whether the investment would be a wise choice to make.

• Mutual Funds have hidden fees that might affect your investment profile

This calls for an assessment, yet again. It is to be noted that Mutual Funds have hidden fees associated with various schemes. In case you have taken a hasty decision and overlooked the process of risk profile assessment, then this particular aspect of Mutual Fund can affect your financial goals in the long run.

Here’s a brief case study as a wake-up call for you.

On 23^rd March 2017, Mr. Andrew Stevenson from Adelaide, Australia, an online assignment help expert by profession, had invested in a Mutual Fund scheme only to realize that there were hidden fees attached as well. As he had already skipped the process of reviewing this particular aspect before investing, his financial goals got disturbed and affected him to a certain extent. He has recently called off the investment and abandoned it midway.

Actionable Point: The hidden fees associated with the mutual fund schemes are clearly referred to as 12b-1 fees. The fee amount is disclosed in the prospectus, and one can also know about it further by visiting the Mutual Fund websites. Thus, the idea is to assess each of these crucial aspects and figure out all essentials before investing. It would both help you analyze the risk profile, all associated costs and financial goals of an individual without much hassle.

• Maintain a healthy balance between the goals you have and the scheme you would choose

If you are not maintaining a steady balance between the financial goals you have and the mutual fund scheme you would choose, then it could give rise to yet another complication associated with a misjudged and miscalculated risk profile. There’s no point investing in a long-term scheme for a short-term goal. It would, as a result, give rise to negative outcomes and hindered financial planning in the long run.

Actionable Point: Sit with your financial advisor for a while, assess your long-term and short-term financial goals closely and then decide to choose the most appropriate one that could fit best for your profile and investment standards.

Since it goes without mentioning that mutual fund investment is one giant step towards constructive financial planning, one simply cannot afford to take things in a light note. If you do not consider doing your homework before investing in a mutual fund, and refrain from prioritizing all minute details associated with the same, then the consequence, in the long run, might not be in your favor. So, try remaining safe, evaluate all crucial details, make sure the scheme matches your investment profile, and never feel sorry for the decisions you take.