Considering that the equity market is experiencing a new all-time high currently, it is also the time to review asset allocation and avoid a few mistakes which an investor may not realise.
Being unclear about investment goals: Mutual funds schemes are of different types. And each scheme is known to cater to a different type of goal. A decision about investing in a particular SIP can be undertaken based on an investor’s financial objectives, risk appetite, and investment time horizon, among others. First, consider the reasons for investing in a particular mutual fund scheme: saving tax, capital appreciation, long-term and short-term needs, saving for retirement, or a child’s education expenses, among others. The answers to these goals will help an investor zero in on a suitable mutual funds scheme.
Kickstarting an unsuitable SIP scheme: Take, for instance, if a risk-averse investor ends up picking equity mutual funds, then the individual is most likely to regret the decision and be stressed about the performance of the investment. Make a note of all such factors based on the investment goal before kickstarting a SIP scheme.
Being irregular with SIP investment: It is essential to have an investment strategy in place and avoid the need to stop SIP investments abruptly. So, make an effort to be regular with SIP investments, irrespective of the market volatility.
Failing to review asset allocation and rebalancing: Like the way how investing is important. Similarly, rebalancing is equally crucial. Rebalancing is the process of resetting the portfolio back to the
desired asset allocation. An investor needs to consider rebalancing at least once a year or when the asset allocation looks deviating from the original plans.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
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