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There is a wide range of options to invest your hard-earned money into, but every investor who invests his/her money in any of the asset classes is highly sceptical while doing so and moreover, they should be. None of us wants to lose the money we have earned.

And with growing financial literacy, more and more people are considering investing in mutual funds, as they have proved to be a strong asset to invest in because of the returns they have given in the past. But, there is still a plethora of mistakes that people tend to make while investing in mutual funds.

Let’s discuss some of the most common mistakes.

• Investing irrespective of the risk appetite
  Before investing, you need to understand that mutual funds are not completely risk-free, they come with a pinch of risk with them. Every mutual fund comes with a different degree of risk. For example, equity mutual funds are highly risky and give higher returns, but what happens sometimes is that people with low risk appetite only consider the higher returns given by them and ignore the risk associated with them, which lands them into trouble.
  
  Therefore, you should always choose mutual funds according to your risk appetite.
• Over Diversification
  Diversification is one of the most critical aspects that must be taken care of while investing. But, if you over-diversify your investments then you may end up earning lesser returns than what you could have potentially earned.
  Imagine if you have invested in numerous funds, then you may earn some good profits from some funds, but losses from others, and remain neutral from some other funds. Then at the end you would realize that you actually didn’t earn compared to what you expected you would earn.
• Investing without Researching
  Investing in a mutual fund because your friend or relative has also invested in it, is a pretty bad decision. If you are investing then it is your duty to invest after doing your research. It is very important to know about the fund type, exit load, expense ratio, AUM of the fund you are investing in and then comparing it with its competitors, because a single mistake while choosing your fund can literally cost you a fortune.
• Expecting Impractical Returns
  Majority of the newbies while investing in mutual funds expect some unrealistic returns and expect that the markets will keep giving positive returns throughout their investment horizon, and this thinking is absolutely wrong. Markets fluctuate and to expect them to give higher returns in a short interval of time is surely an unwise way of thinking.
• Impulsive Decisions
  No doubt in the fact that all of us feel anxious when we see the value of our money decreasing. But, whoever overcomes this anxiety and avoids making decisions in the panic situation, always wins the game of investing. Reacting impulsively during a market downturn is a sin which we don’t want our reader to commit.

We hope you will not commit any of these mistakes while investing, and even if you have committed some of these, then remember you are not the only one. We all commit mistakes, but what is important is that we learn and grow from our mistakes.