10 things mutual fund investors should not be doing!

Here are 10 things mutual fund investors should not be doing! Avoiding these will make you a better and contented investor. Naturally, the following is an opinion formed from my experience (and nature) and naturally, I do not expect many of you agree with me.

The serenity prayer made popular by AA groups goes like this:

God grant me the serenity to accept the things I cannot change;
courage to change the things I can; and wisdom to know the difference.
Living one day at a time;
Enjoying one moment at a time;
Accepting hardships as the pathway to peace;

With a little experience, most investors would recognise that this applies to investing as well. In particular to mutual fund investing, where we have control over only three things (1) when we buy the fund, (2) when we exit from the fund (3) how well we can analyze the performance of the fund objectively (for which all we need is NAV data). The rest is not in our control. So here are 10 things mutual fund investors should not be doing!

10 things mutual fund investors should not be doing

10 things mutual fund investors should not be doing!

  1. Do not look at the stocks that a fund is holding
  2. Do not see who the fund manager is
  3. Do not look at your daily gains and losses. Do not look at whether the market has moved up or down each day
  4. Do not look at the comments section of your fund’s page at Value Research
  5. Do not subscribe to AMC emails
  6. Do not look at star ratings
  7. Do not look for answers reg why a fund is falling down
  8. Do not look at annualized returns unless you invest for at least a year
  9. Do not ask other people about what to do with your investments!
  10. Do not panic if someone else is criticising your fund.  Do not look for confirmation of your choices from other sources!

Bonus points

  • Unsubscribe from all blogs (esp mine), investing groups, unfollow all Twitter handles related to investing, especially those with the dreaded bluetick
  • Do not ask for real-life experiences of older investors.

Explanation

1: Do not look at the stocks that a fund is holding

Why? Because it is of no use. We* do not know why a fund manager picked a stock and we do not know why they exited or reduced its position. * very few can make meaningful inferences out of these and those do not need mutual funds in the first place!

2: Do not see who the fund manager is

Why? Because it is of no use. A fund manager is merely an employee of the fund house and can change jobs at any time. Getting attached to them is immature. I have seen many people talk about “investing styles” of these guys. It reminds me of a story.

There is a popular movie reviewer – very eloquent and detailed in his description of each move and he gave rave reviews for a movie. How artistic it was, how each shot and location was carefully selected and how many scenes have several nuances. The director of the film was shown this review and he laughed! The director said the movie was made with the only objective- make as much as money as possible in as little a budget as possible. Most of the nuances that the reviewer talked about are accidents and comprises!

Unless you have access to the investment decisions of the fund management, talking about it or trying to find out about it is a waste of time. I think such people will be happier with direct equity

3: Do not look at your daily gains and losses. Do not look at whether the market has moved up or down each day

Why? Because it is of no use.

4: Do not look at the comments section of your fund’s page at Value Research

Why? Because most of them will confuse you.

5: Do not subscribe to AMC emails

Why? Because they will send you emails about NFOs and market outlooks. Both are of no use to you and will confuse you.

6: Do not look at star ratings

Why? Because they look at a period different from that of your investment duration. In the stock market, when you look at something determines the outcome! You don’t want an irrelevant analysis, do you?

7: Do not look for answers reg why a fund is falling down

Why? Because you cannot find any. All you can do i speculate and it will not help

8: Do not look at annualized returns unless you invest for at least a year

Why? Because they do not make sense for shorter durations and even for longer durations is only a crude estimate. Read moreWhat is XIRR: A simple introduction

9: Do not ask other people about what to do with your investments!

Why? Because most of them know no better than you do and just act as they do

10: Do not panic if someone else is criticising your fund.  Do not look for confirmation of your choices from other sources!

Why? It is stupid and immature to do so.

Bonus points

Unsubscribe from all blogs (esp mine), investing groups, unfollow all Twitter handles related to investing, especially those with the dreaded bluetick

Why? Because you do not need any of them. The only reason I am able to take investment decisions on my own is that I do not read anything, literally anything, including what I write.  Try it, it will change your life. Start an Information Diet: How Less Information Can Make us More Informed

Do not ask for real-life experiences of older investors (solved example syndrome)

Why? Because it is of no use to you. It will look like it is useful when you read it, but it will wear off soon.

God grant me the serenity to accept the things I cannot change;
courage to change the things I can; and wisdom to know the difference.

Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media


Do check out my books


You Can Be Rich Too with Goal-Based InvestingYou can be rich too with goal based investing

My first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create customg solutions for your lifestye!Get it now.  It is also available in Kindle format.

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want My second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a youngearner

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step.  Get the pdf for ₹199 (instant download)

Create a "from start to finish" financial plan with this free robo advisory software template


Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

About Freefincal

Freefincal has open-source, comprehensive Excel spreadsheets, tools, analysis and unbiased, conflict of interest-free commentary on different aspects of personal finance and investing. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. We do not accept sponsored posts, links or guest posts request from content writers and agencies.

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

6 thoughts on “10 things mutual fund investors should not be doing!

  1. If I am not wrong, I a nut shell…..go for index funds.
    Independent from every professional one, yet dependent on sentiments of everyone (investor).

Comments are closed.