Maha Capital Founder Vijay Karanam as they discuss the most common mistakes made by mutual fund investors and how to achieve a secure financial future.
The Reality of Returns and Investor Behavior
Vijay Karanam reveals a concerning statistic: 9 out of 10 mutual fund investors receive negative returns. Although mutual fund data spanning at least 25 years shows funds that have delivered above a 20% Compound Annual Growth Rate (CAGR), very few investors who started 15 or 20 years ago continued their investments long enough to realize returns in crores. Interestingly, among the few who did successfully accumulate returns over the last 20–25 years, the data shows that they either forgot they had invested or have passed away, leaving family members unaware of the investment.
Mistake 1: Insufficient Investment Due to Societal Pressure
A significant problem is that many people earning high incomes (often ₹1 Lakh and above) are unable to allocate even 10% of their income towards investment, resulting in small SIPs (e.g., ₹5,000 or ₹10,000). The speakers identify society as the "biggest evil thing" driving this issue.
For example, societal or family pressure often pushes a person earning ₹1 Lakh per month to buy a ₹1 Crore house around age 25. This decision leads to high EMIs (₹60,000 to ₹80,000), leaving them with minimal savings (just ₹20,000–₹30,000). In a "hard reality," many even take out personal loans to cover the 20-30% down payment required for the home loan. The resulting reliance on EMIs and car loans, compounded by the use of the "biggest culprit," the credit card (especially for cash withdrawals), means that 95% of people face this financially constrained situation. The advice given is to delay purchasing a house until after 35 years of age when income is surplus and they are completely settled. Without proper investment planning, these high earners risk becoming financially poor later in life when their income growth slows after age 40.
Mistake 2: Avoiding Expert Financial Advisory
Many investors attempt to conduct their own research on social media or YouTube and avoid consulting an advisor, often due to wanting to save the small commission fee (0.5% or 1%). This approach is compared to attempting to perform brain surgery after watching a YouTube video—expertise should be recognized and used.
The speakers emphasize that while people focus on the small commission they pay, they fail to consider the potentially higher returns an advisor can help them achieve (for example, pursuing 20% returns versus being content with 15%). An advisor is crucial because they ensure the investor remains in the correct fund for 15 years, prevents panic selling during market downturns, and urges the investor to increase investment when the market is low.
Avoid these critical errors to keep your financial planning on the correct track and definitely build wealth over the long term.
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Top 3 Mutual Fund Mistakes to Avoid for a SECURE Financial Future | SIP Investment | Vijay Karanam
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