Why do some investors fail to yield maximum returns from mutual fund investments? Here are 7 reasons
risk tolerance and financial goals. Exercising patience and maintaining a steadfast focus on predetermined objectives are, in fact, fundamental elements for optimizing the advantages of mutual funds. These two factors play a pivotal role in achieving successful long-term investments, particularly in navigating market fluctuations and short-term volatility.
Even though mutual funds provide a reliable investment strategy for realizing long-term financial goals, numerous investors succumb to emotional biases and irrational behaviour, which can result in unfavourable experiences. These prevalent mistakes have the potential to impede the returns from mutual funds and obstruct investors from attaining their financial objectives. Chasing past performance is a frequently observed and potentially harmful error committed by investors.
The allure of investing in funds that have recently surpassed the market, with the expectation that their exceptional performance will persist, is strong. Nonetheless, this approach is flawed for various reasons. This is because the past success of a fund does not assure its future performance.
Market conditions, investment strategies, and economic factors can undergo substantial changes over time, influencing the performance of individual funds and the broader market. Furthermore, funds that have exceeded the market in recent years may be assuming higher levels of risk to attain those returns. This heightened risk poses the potential for substantial losses in the future, especially if market conditions worsen.
Read more on livemint.com
