There are no items in your cart
Add More
Add More
| Item Details | Price | ||
|---|---|---|---|
Are you choosing the wrong mutual funds without realizing it? Here are 5 common beginner mistakes in fund selection — and how to avoid them smartly.
30/06/2025
You’ve decided to invest in mutual funds. Great! But wait — are you choosing the right ones? Many investors unknowingly fall into common traps: chasing returns, ignoring risk, or choosing funds that don’t match their goals. Let’s uncover Part 1 of common fund selection mistakes — and show how small fixes can lead to big wins.
Top 5 Mistakes in Fund Selection
❌ 1. Choosing Funds Based on Past Returns “Last year it gave 40%! Must be good.”
Wrong. Past performance doesn't guarantee future success — especially in volatile categories like small-cap.
💤 2. Ignoring Your Risk Profile A 23-year-old may tolerate volatility; a 60-year-old may not. Choosing a mid-cap fund when you can't sleep during corrections? That's a red flag.
🎯 3. No Goal Matching
Each fund should serve a purpose: emergency, retirement, child’s education. Random fund selection = random results.
📊 4. Overdiversification
Buying 10 equity funds doesn't reduce risk — it adds confusion. You end up replicating an index and paying higher expense ratios.🧾 5. Not Checking Expense Ratios
Two funds may offer similar returns — but the one with lower expense ratio leaves more in your pocket.Real-Life Example: Rakesh’s Return Chase Rakesh picked three small-cap funds in 2021 because they gave 50%+ in 2020. But in 2022, those funds lost 18–25%. He later realized they weren’t suitable for his short-term home renovation goal.
Conclusion
Fund selection isn’t just about numbers — it’s about fit, discipline, and clarity. Avoid these common traps, and your portfolio will thank you.
Before picking a fund, ask:
“Does this suit my goal, time frame, and risk appetite?”
Summary Table: Fund Selection Mistakes
| Mistake | Risk It Brings | Better Approach |
| Chasing past returns | Poor future returns | Focus on long-term consistent performers |
| Ignoring risk profile | Panic selling in downturns | Do a risk assessment before investing |
| No goal alignment | Misuse of funds | Match fund to specific goal & horizon |
| Too many funds | Confusion, duplication | Limit to 4–5 diversified funds |
| Ignoring expense ratio | Lower net returns | Compare similar funds for lower costs |
Dr. Satish Vadapalli
Research Analyst
Launch your Graphy