Best Mutual Funds for Lumpsum Investment | Mistakes to Avoid in Mutual Funds | PS Chandrashekar

Welcome to SocialPost Finance! In this critical discussion, Mutual Fund Distributor PS Chandrashekar joins Nihal to explore the common, yet costly, mistakes investors make when planning for Lumpsum investments in Mutual Funds.

While investing for the long term and utilising SIPs (Systematic Investment Plans) are known strategies for creating significant wealth, errors are often made—sometimes knowingly and sometimes unknowingly. Learn how to safeguard your large investments (e.g., ₹50 lakhs or ₹1 crore) by avoiding these common investment pitfalls.

Key Mistakes Discussed:

1. Lack of Knowledge and Direct Investment Many investors, particularly those dealing with large Lumpsum amounts, lack the necessary knowledge and choose to invest directly. This often leads them to exit the investment prematurely (within 1.5 to 2 years) because the returns generated do not meet their expectations.

2. Trying to Time the Market A major mistake is attempting to predict market movements—believing the market will fall further, prompting them to delay investment ("buy on dips"). Since timing the market is impossible, investors risk missing sudden, large rallies. It is crucial to analyze market conditions and volatility before deciding on a Lumpsum investment or a staggered approach.

3. Misallocation of Lumpsum Funds The discussion highlights that investing a Lumpsum amount and staying invested for 20 years can create substantial wealth. Conversely, using existing Lumpsum money and spreading it out over a long period (10–20 years) through SIPs generates lower returns. Investors often mistakenly use this staggered SIP approach for money they already possess.

4. Ignoring or Failing to Set Proper Goals Investors frequently focus heavily on long-term goals (e.g., retirement at 50 or 60 requiring ₹3-5 crores) while ignoring short-term goals (like vacations, children's education, or marriage expenses). When short-term needs arise, investors are forced to withdraw money from their long-term corpus, which ultimately affects the achievement of the overall long-term financial goal.

5. Ignoring Risk Tolerance and Contingency Planning It is essential to analyse one's financial background, properties, and capacity to take risks, often using thumb rules (like "100 minus age goes to equity"). While risk is present in all activities and in mutual funds due to market volatility, historical data shows that funds can generate average returns of 12% to 15% over long tenures (15, 20, or 30 years). Risk tends to be higher in the short term.

• Essential Safety Net: Crucially, every investor, especially those with an income, must plan for an Emergency Fund covering 6 months to 1 year of their normal expenses. This fund safeguards against unforeseen events like job loss, hospitalization, or admission fees.

6. Investing Solely Based on Past Returns Many investors select schemes purely by looking at high past returns (e.g., 20%, 25%, or 30% over the last 1–3 years). It is vital to understand that past returns are not a guarantee of future returns. Mutual Fund AMC rankings rotate. Instead of chasing high past returns, focus on analysing the fund manager, the expense ratio, and the portfolio structure. Investing in currently underperforming funds (buying on dips) might offer greater future returns.

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Best Mutual Funds for Lumpsum Investment | Mistakes to Avoid in Mutual Funds | PS Chandrashekar
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#Finance #Investing #MoneyTips #SocialPostFinance #Socialpost

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