Mutual fund investments are becoming increasingly sought after by Indian retail investors, and this is not hard to understand. With the wide variety of mutual funds available in the market, there is something out there for everyone regardless of whether you’re willing to take a risk or prefer low-risk options. Your short-term, medium-term or long-term financial goals can all be achieved with a suitable mutual fund scheme that fits your individual investment requirements. Be it tax savings or wealth creation, you’re certain to find an appropriate mutual fund option.

But before you invest in mutual funds online, you should be aware of a few key points. Specifically, you need to know what mistakes mutual fund investors usually make, so you can avoid these pitfalls and maximize your mutual fund investment.

Since human judgement is prone to error, most investors are bound to make some mistakes. There have been thousands of investors before you, and there will be thousands after you.

Find out where new and experienced investors tend to falter when it comes to investing in mutual funds.

In the case of mutual funds, there are so many different kinds of schemes available in the market that you need to know the ins and outs of the investment option before investing.

Whether it is based on the type of assets they invest in, the nature of redemption, the tenure of investment or the risk and the investment objectives, the variety of mutual funds is quite high. Before buying mutual funds online, you should also be aware of different fees and charges, as well as taxation.

You should avoid making the costly mistake of going in without adequate research.

Some mutual funds are geared toward long-term investors, while others may have a shorter investment period. Some mutual funds have different investment objectives and characteristics. Investing in equity funds gives you the chance to create wealth, but investing in debt funds gives you fixed returns.

In investing without a clear goal in mind, you may not achieve your financial goals. Worse still, you may mismanage your investment returns if you do not have a plan.

Therefore, it is important to align your mutual fund investments with your financial goals. For example, if you want to invest for a specific goal, like buying your dream home in the next five years, you can buy mutual funds with a three- to five-year investment horizon.

This involves finding the ‘right’ time to enter and exit the market. The problem is that it is impossible to predict how the market will move in the future, so there is no ‘right’ time.

If you decide to invest in mutual funds online when the market dips, you may assume that it will rise in the near term. However, if the market continues to be bearish, you will lose money.

Investing in mutual funds through a Systematic Investment Plan (SIP) prevents you from making costly mistakes by trying to time the market. Through your investment in the mutual funds of your choice, you can invest small amounts of money on a periodic basis. Despite market volatility, your investment costs average out over time.

This is a complex mistake that has two worrying aspects. The first is herd mentality, which involves blindly following what other investors are doing. The second aspect is investing on an impulse, without taking an objective view of why you are buying a particular mutual fund. Another common and related mistake is selling in panic when the market is falling.

You can lose a lot of capital over time by making both of these mistakes together. You can avoid this mistake by having an investment plan that outlines when to buy and when to sell. To overcome the urge to buy impulsively, you can invest in mutual funds as a SIP.

You should invest in mutual funds according to the level of risk you are willing to take and the level of risk you can afford.

You can choose mutual funds based on your risk tolerance and appetite, whether you are a risk-taker, a moderate investor, or a conservative investor.