A mutual fund is a Pooled investment vehicle that collects and pools money from several investors and manage it by appointing a professional fund manager. Practically, one does not invest in mutual fund, but invests through mutual funds.

Mutual Funds invest in stock market (i.e., equities), bond market (corporate bonds as well as govt. bonds) and Money Market instruments such as Treasury Bills, Commercial Papers, Certificate of Deposit, Collateral Borrowing & Lending Obligation (CBLO) etc. Many of these instruments are not available to retail investors due to large ticket size of minimum order quantity (such as G-Secs) and hence, retail investors could participate in such investments through mutual fund schemes

In other words, through investment in a mutual fund, an investor can get access to securities, that may otherwise be unavailable to them and avail of the professional fund management services offered by an asset management company.

The primary role of mutual funds is to help investors in earning an income or building the wealth over a long period of time, by investing in the opportunities available in securities markets.

However not everybody makes it to the wealthy end. There are several reasons behind the not so successful experience. The first and common reason is investing without financial goals, investing without a goal is like travelling without a destination. If you ignore your financial goals, you will end up choosing investments which do not suit your needs.

Another common mistake is trying to time the market and investing all the money at one go, now this is a tricky game and not many investors can handle the situation emotionally leading to wrong decision making and losing out on opportunities.

Investing in too many schemes is the most common mistake investor commits thinking that they are diversifying. They tend to forget that each MF scheme itself is a diversified portfolio of securities. More schemes you buy, more difficult it became to keep a track of it.

Ignoring your risk profile and asset allocation. This is the most important while investing in equity market as investors get carried away and opt for risky schemes leading to giving away all the gains earned over months and years in a quick market fall.

Not reviewing your Mutual Fund portfolio, it makes sense to conduct a periodical review of all your MF schemes and remove underperformers. Failing to review can cost you a fortune.

A Qualified Financial planner is competent enough to help and guide you build a Superior MF portfolio in line with your goals and risk profile.