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Why Do People Lose Money in Mutual Funds?

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

Indians still do not 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 a creepy and misguided mode of investing.

Few Reasons Why People Lose Their Money in Mutual Funds

1. Investment – Time is Money

An investment adviser suggests making the investment at the correct time and dedicating your time to invest. Quickly earning money or making money from 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 people just enter the world of investing like mutual funds without proper knowledge and understating of the market risk and ways to invest for better returns.

This situation might direct you to invest in such an asset that 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 investors or studying mutual funds investments. You may also ask your fund managers to know more about investing.

3. Not Able to Discriminate Among Trading & Investing

Investing and trading are two different types of investment schemes both are not the same. You cannot invest money in both types of schemes at the same time. Here what you need to understand is in mutual funds you have to invest for a long period and trading is something you can achieve short-term goals. This is 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 decisions without knowing the consequences and this could lead to your money in the loss.

Solution: Try to know in detail about your fund manager. You may check the fund manager’s past fund management history so you will come to know that the manager 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 invest their money to keep an unrealistic desire in mind. While the market is full of risk so sometimes not able to achieve their financial goals.

Sometimes when the market is in good condition you may get benefits of 22% and when markets are down you may get a 12% gain in a year. Investing in a fund just because it gives you more returns can lead to a loss.

Solution: Investing imposes 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 your risk bearable capacity and invest as you can afford the risk.

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