Anup is a financial advisor and a sincere one. He advises people on mutual funds investment as per their requirement. Anup, in his interaction with many clients, has come to realize that many of the investors want to preserve their capital as well as earn an average return. It is fine for them to receive average returns as long as the capital is preserved. Investors, however, do want better returns than the banks. Anup realised that there in the market there is a significant set of investors who are risk averse and want a fund that not only preserves their capital but provides returns at least as good as banks.

Anup, to satisfy and to do justice with the requirement of his clients started suggesting debt funds to his clients. It was all good. Debt funds usually don’t lose money. They provide periodic returns as well as chances of capital appreciation when interest rates go down.

Mutual funds are managed by fund managers and hence investors do not have much say in where the fund managers choose to invest. What investors can do is to choose the mutual funds that match their investment philosophy. There are equity funds which invest in large blue chip companies. There are equity funds that take little more risk by investing in mid cap and small cap companies expecting better returns. Then there are debt funds which do not pose much risk to customers and give moderate returns. There are hybrid funds which invest a part in debt and a part in equity. These funds expose investors to higher risk than debt funds but lower risk than equity funds.

Despite availability of information and despite being passive investors, most of the investors still manage to make mistakes which prove harmful for their investment and results in dissatisfaction, unnecessary arguments with their advisors, and loss of investment. In this article, we will discuss few common mistakes made by mutual fund investors and how can they avoid making it and losing on sleep and money.