You’ve started your first job. Soon, it is tax-filing time and you invest in tax-saving mutual funds from an online portal. Then, somebody advises you to start a systematic investment plan (SIP). You get in touch with a distributor and buy a scheme. Then, say, you get transferred to another city, and buy more schemes from another distributor. The result? You have bought funds from several people. What’s wrong in that?
One of the most common financial mistakes that investors make is they buy products from several people or distributors. Before they know it, they end up having a dozen or two mutual fund schemes (which is bad enough) but also from multiple distributors (which is worse).
Consolidation means digging out past investments, searching for documents and chasing distributors who may have already lost touch.
Look at a plan
Most of us tend to buy one mutual fund scheme at a time. There’s nothing wrong with it. People at the beginning of their careers, sometimes, have expenses like paying off their student loans or expenses related to moving to a city where they get their first job. With humble salaries, it’s hard to make a big investment splash, though at Mint Money, we always recommend to start investing a small portion as soon as we start earning.
What’s the way out? Think of your financial goals. If we start thinking of what we want to do with our money, build financial goals and work towards them—even with one scheme at a time—we take a portfolio approach, instead of buying schemes off the shelf.
This ensures that each scheme we buy is bought with our overall risk profile and risk tolerance in mind. An over-the-shelf investing method could result in you buying all equity or all balanced funds, if your risk profile is high.
A good way to invest is to stick to one investment advisor or even a single online investment portal if you prefer to invest directly. This way, it becomes easier to keep a check on your financial goals and risk profile everytime you buy a new scheme or decide to exit one.
Buying schemes from one advisor or investment portal also ensures that you don’t end up buying duplicates.
Buying duplicate schemes could also mean buying two or more schemes that do the same thing. Or it could be about buying schemes from the same fund house. Sticking to a single seller or advisor helps avoid buying duplicates.livemint