Why do People Lose Money in Mutual Funds?

Investing in Mutual Funds

Nonetheless, the fact is far from reality. Although, mutual funds are not absolutely fool-proof or reliable, which does not mean it is a way of loss. There are some certain reasons why individual lose their money in mutual funds.

Indians still consider mutual funds investment a good investment option or financial product. The reason for delayed return comes with the fear of losing hard earned money makes mutual funds creepy and misguided mode of investing.

Few Reasons why People Lose Their Money in Mutual Funds

1. Investment – Time is Money

Investment adviser suggests that making the investment at the correct time and dedicate your time to invest. Quickly earning money or making money from an equity mutual funds is not possible you require to invest your money for at least 3 years or more. Keeping a perfect time frame for investing can help you to stay organized.

Solution: You require an investment plan which defines your time frame very apparently. Try to neglect any early withdrawal because of momentary market dryness situations. You should stay invested for your complete time frame to get better returns.  

2. Lack of Understanding and Knowledge about Mutual Funds

Most of the people just enter the world of investing like mutual funds without proper knowledge and understating the market risk and way to invest for better returns. This situation might be direct you towards invest in such asset which will not give desired returns. In fact, try to avoid any untimely entry and exit from mutual funds because it may also lead to a loss.

Solution: You should be involved in classes for educating investor or study about mutual funds investments. You may also ask your funds managers to know more about investing.

3. Not Able to Discriminate Among Trading & Investing

Investing and trading are two different types of investment scheme both are not same. You cannot invest money in both types of the scheme at a time. Here what you need to understand is in mutual funds you have to invest for long period and trading is something you can achieve short-term goals. This the time when people mix both investing and trading they tend to lose money.

Solution: Keep or create goals and try to achieve them so that you can boost your financial life.

4. Capricious Mutual Fund Managers

The man who is dealing with your money is known as a fund manager. They are being appointed by fund houses well experienced and trustworthy people for investing your money in a good way so that you can gain benefits from your investment. In fact, fund managers are doing their job well but some of them are taking some serious decision without knowing consequences and this could lead your money in the loss.

Solution: Try to know in details about your fund manager. You may check fund managers past fund management history so you will come to know that the manger you are appointing is able to manage your money. If you know that your fund managers are able to handle any market risk smoothly this can be a plus point for you.

5. Avarice for Impossible Profits & Returns

Few people who invest their money to keep an unrealistic desire in mind. While the market is full of risk so sometimes not being able to achieve the financial goals. Sometimes when the market is in good condition you may get benefits of 22% and when markets are down you may get 12 % gain in a year. Investing in a fund just it because it gives you more returns can lead to a loss.

Solution: Investing impose to risk and one thing as soon as you accept the truth it is better for you. You should only desire to gain as much as you are able to take the risk. So better check you risk bearable capacity and invest as you can afford the risk.