A Critical Look at the Mistakes Committed by Indian Equity Mutual Fund Investors

Abstract

Getting rid of mistakes is a prerequisite for success in any investment. It is true for investment in mutual funds as well. Wealth creation depends on the judicious use of money. But what is worrying is the fact that those who invest in equity mutual funds often commit mistakes. There is no comprehensive study on mistakes committed by equity mutual fund investors in the Indian context. The objectives of the study include (a) To identify the mistakes committed by Indian equity mutual fund investors, (b) To explain the reasons for committing such mistakes, and (c) To mention the ways to refrain from committing such mistakes. Secondary data provide the foundation of this exploratory study. An attempt has been made to analyse the mistakes with simple illustrations along with real-time examples for the convenience and simple understanding of the stakeholders. It is observed that the mistakes made by equity mutual fund investors include lack of research, ignoring risk profile, delaying investment, behavioural biases, investing without a goal, chasing New Fund Offers (NFOs), overemphasising past returns, inadequate or over-diversification, not keeping money for emergencies etc. The reasons for committing such mistakes have been presented along with the possible way-outs. Investors have to refrain from committing mistakes to ensure long-term wealth creation.