Qualities of a successful Mutual Fund Investor

Investing in the best performing mutual funds (there’s no such thing as that) is not enough, investing well with a proper long term plan is the need of the hour.

Information is abundant these days across all fields and not just in mutual funds but that creates more hurdles than solves problems.

What is required is for a mutual fund investor to possess adequate knowledge (basic is fine), to be able to imbibe a sense of discipline and patience.

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A good investor knows how to make money, a successful investor knows how to generate and protect wealth too.

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They have a plan

Having a plan means considering:

  1. Age
  2. Goal
  3. Time Horizon
  4. Whether first time or experienced investor etc.

It does however not mean:

  1. Investing in ‘top mutual funds’.
  2. Investing on the advice of friends, family, relatives, etc.
  3. Trying to time the market
  4. Tracking your returns daily, weekly and monthly.

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Why having a plan helps?

  1. When having doubts about your mutual fund investments, it reminds you of your goal and why you started.
  2. It helps you stay disciplined.
  3. It helps you look at the bigger and not be discouraged by temporary setbacks.


They think long term

  1. A successful mutual investor in the making knows that there is no substitute for long term patience.
  2. They understand that growth takes time and mutual fund investments are no different.
  3. They invest in mutual funds only when they have a plan for 5 years or more and have the mental, emotional and financial ability to sail through volatile time.
  4. They are no perturbed by short term volatility nor do they track the markets daily.


Why thinking long term helps?

  1. It makes sure that you are not swayed by emotions.
  2. Staying disciplined means, you are not swinging from flavour of the season mutual fund schemes every now and then.
  3. It makes sure that your decisions are backed by proper planning and due diligence and not by fear, doubt or greed.


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They understand their risk profile

Investing in mutual funds without a prior risk profile is akin to crossing a street without looking both ways.

No two individuals despite having the same:

  1. Age
  2. Gender
  3. Goal
  4. Time Horizon etc. can have the same risk appetite.

This is because no two individuals are the same and this stands true for when you are investing in mutual funds too.

The personal in ‘Personal Finance’ holds more weight than finance, some unfortunately only learn this the hard way.

As mentioned at the very beginning of this write up, protecting wealth is as important if not more than generating wealth.

The door that helps you get inside your home should also help you get out of it.


Why understanding one’s risk profile is important

  1. When you dine at a high-end restaurant and place an order for a dish that is open to variations, the person taking your order usually inquires whether you are allergic to anything that could be a part of the dish.
  2. If not intimated before hand then there is a very high chance of an untoward incident.
  3. A first time investor in mutual funds cannot have the same risk profile as an experience investor.
  4. An investor that tracks the markets daily is more prone to making rash decisions than say someone who does so every once in a while.
  5. In such a scenario both of them clearly have different approaches and therefore would need to be managed accordingly.

Additional reading: Click Here to read more about on How to understand your risk profile

              Risk profiling needs to be done before you initiate your mutual fund investing journey and not during, usually the lack of it leads to avoidable losses with regards to taxes, exit loads and time.

              The paramount point to consider is time, you can always recover the prior points but never time be it mutual fund investing or just life in general and this takes away the opportunity of compounding benefit.

              You check the temperature of the sea water by touching the surface and not by diving deep towards the trenches.  


They follow professional advice


This continues to be a very understated point as far as investing in mutual funds is concerned.


We are a country with abundant folks and ergo abundant opinions too, it’s only human.

  1. A mutual fund investor values professional advice over random advice given (often uncalled for) by friends, family, relatives, etc.
  2. As mentioned earlier, no two people have the same risk profile and how risk profiling should be conducted prior to investing in mutual funds and not after.
  3. A quality mutual fund investor is very much capable of being able to differentiate the kind of advice that he needs to pay heed to and the kind of advice that he needs to discard.


Why following Professional Advice helps

  1. Following professional advice means mutual investments that are backed by logic and proper research rather than a scatter gun approach.
  2. This means that you have a well diversified mutual fund portfolio that not works towards growth but also makes provision for protection of that growth.
  3. They are a lot more confident about their investments since they are backed by plans.
  4. The timely review of their portfolios by professional hands keeps a check on any changes that may be mandated.
  5. They are often spared from ‘expensive mistakes.’

Additional reading: Click Here to read more about on How to Diversify your mutual fund portfolio

All in all, investing is simple but not easy and investors have often in the past found new ways to complicate it. It’s usually not the lack of knowledge but the acceptance of the lack of knowledge foremost that leads to events that could have been so easily avoided.

As much as investing in mutual funds is a journey, remember that not all can afford to commit ‘expensive mistakes’ and certainly not more than once.

For portfolio enquiries, email us with your doubts at info@themutualfundguide.com

Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing

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