What are the SIP mistakes one should avoid while investing in Mutual Funds

What are the SIP mistakes one should avoid while investing in Mutual Funds

IMPROVE YOUR FINANCIAL HEALTH

1. Don't over diversify and buy more than ten funds across the market cap unless you want to add one for tax savings. If you are small investor buying for 1 or 2 thousand amount, one multicap fund should be good for you.
2. Buy on monthly SIP basis. Start early even with the small amount to get the benefit of compounding.
3. Mutual funds are exempted from tax on income they generate and you only pay capital gain tax when you redeem. Therefore you also gain by tax deferral.
4. Don't stop the SIP when the markets are down, it will help you to buy funds at cheaper price and averaging the cost.Stay invested at all the time.
5. Don't have short term prospective, you should stay invested for atleast 5 to 7 years when investing in equity mutual funds.
6. Only invest the money which you don't need in nearby future. Regularly investing for long time will give you benefit of compounding which is known as 8th wonder of world in investment terms.
7. Don't invest in dividend option, dividend paid are taxable now and amount paid is not fixed.If you need regular income, withdraw by SWP.
8. if you are risk averse person, want to invest with relative lesser risk or have shorter horizon of 3 years,invest in balance advantage funds, invest in equity balanced funds upto 5 years horizon.
9. Don't trade in mutual funds or buy and sell frequently. invest for long time unless your fund is consistently not performing as compare to peers. Don't exit before 1 year as it will attract exit load and short term capital gains.
10. Never be sure that past performance will be repeated in future. investing in 5 star rated fund may not give you best returns in future. Look for quality of stocks in mutual fund holdings and fund manager performance.
11. Don't invest into thematic funds unless you have good knowledge about market. They follow the cycle and you may not be able to time the buying. These are more riskier than other funds.
12. Lastly, don't blindly follow anyone,do your own research also.

13. Lumpsum investment can be done            in NFO's (new Fund Offers) and                 good existing  balanced funds/  Multicap funds (dividing and investing on          different dates)

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*Mutual finds are subject to market risks. pl go through documents carefully before investing.