Mutual fund investment mistakes are common, especially among new investors, even though the industry is growing rapidly. With Asset Under Management (AUM) reaching 75.36 trillion rupees as of July 31, 2025, according to AMFI, the total amount collected through SIP during July 2025 was 28,464 crores, which is constantly on the rise.
Many investors, especially those new to the market, often make mistakes that can be costly.what are the mistakes ? let’s find out.
1. Investing Without Clear Financial Goals :
As per data from Fund Houses, nearly 43% of retail investors don’t hold equity assets for more than 2 years, which is one of the common mutual fund investment mistakes. Attaching clear goals to your investments—like retirement, buying a house or car, or funding your children’s education—can bring discipline to your investing journey. Having a financial goal acts as motivation and keeps you invested even when you feel like quitting for any reason.
2. Skipping SIP or Stopping SIP in a Downtrend :
First off, mutual funds do not charge any penalty if you miss an SIP, but your bank may levy charges due to automated payment failure. One of the biggest mutual fund investment mistakes is stopping SIPs during a market downtrend. By doing so, you miss the chance to accumulate more units at lower prices. Skipping SIP installments may seem harmless, but it breaks the power of compounding, disrupts rupee cost averaging, weakens investment discipline, and in some cases can even lead to cancelled mandates—all of which can derail your long-term wealth creation journey.
For example, you are doing a monthly SIP of ₹5,000 in HDFC BSE Sensex Index Fund. Now, skipping just one SIP every year for 15 years may not look like a big deal, right? But in reality, skipping one SIP every year may reduce your overall return by almost 9%.
HDFC BSE Sensex Index Fund, ₹5,000/month, 15 Years at 12% Annual Return)
| Category | Regular SIP | Missed 1 SIP/Year | Difference |
|---|---|---|---|
| Invested Amount | ₹9,00,000 | ₹8,91,000 | ₹9,000 less |
| Future Value | ₹25,23,000 | ₹23,24,000 | ₹1,99,000 less |
| Profit | ₹16,23,000 | ₹14,33,000 | ₹1,90,000 less |
| % Profit Reduced | — | — | ~9% lower |
3. Not Increasing SIP Over Time :
Increasing your monthly SIP amount every year is a good practice. By increasing your SIP amount by 10% annually, you can achieve your financial goals faster and beat inflation. This simple step can have a significant impact on your final corpus as it leverages the power of compounding and rupee cost averaging. One of the common mutual fund investment mistakes investors make is not increasing their SIP over time, which limits their wealth creation potential.
For example, if you start a monthly SIP of ₹5,000 in the HDFC BSE Sensex Index Fund assuming 12% annual return ,you can build up to 70% bigger corpus by increasing your SIP amount 10% every year, compared to keeping it fixed.
calculate here: https://groww.in/calculators/step-up-sip-calculator
| Years | Fixed SIP Corpus (₹) | 10% annual increse SIP Corpus (₹) | Extra Corpus (₹) | % Bigger |
|---|---|---|---|---|
| 5 | 4.12 Lakhs | 4.97 Lakhs | 0.85 Lakhs | ~21% |
| 10 | 11.62 Lakhs | 16.97 Lakhs | 5.35 Lakhs | ~46% |
| 15 | 25.23 Lakhs | 42.85 Lakhs | 17.62 Lakhs | ~70% |
4. Overlooking the Expense Ratio :
Expense Ratio might seem insignificant, but its impact grows over time, potentially reducing your overall profits. Direct plans typically have lower expense ratios than regular plans, so it is always better to opt for a direct plan. Typically, any expense ratio higher than 1% is considered high and could affect your long-term returns. One of the common mutual investment mistakes is ignoring the expense ratio while choosing funds.
For example, a monthly SIP of ₹5,000 for 15 years at 12% annual returns shows how different expense ratios affect the final corpus.
| Expense Ratio | Net Annual Return | Corpus after 15 years (₹) | Loss vs 0.5% (₹) |
|---|---|---|---|
| 0.5% | 11.5% | 24.77 Lakhs | – |
| 1.0% | 11.0% | 23.44 Lakhs | 1.33 Lakhs |
| 1.5% | 10.5% | 22.17 Lakhs | 2.60 Lakhs |
| 2.0% | 10.0% | 20.96 Lakhs | 3.81 Lakhs |
5. Ignoring Your Risk Profile
Every investor has a different risk appetite. Investors with a low risk appetite can go for index funds for relatively stable returns, while investors with a higher risk-taking appetite can opt for small-cap and mid-cap funds for potentially higher returns. The 80-20 rule can be handy in this situation—invest 80% of your portfolio in index funds (lower-risk assets) and 20% in higher-growth assets like mid-cap and small-cap funds. Avoiding imbalance in allocation is important, as it can lead to mutual fund investment mistakes that may hurt long-term wealth creation.
6. Chasing Past Returns :
Investing in mutual funds solely based on their recent high performance is generally not a good strategy. Past performance does not always guarantee future returns. Always look for funds with 5–10 years of returns. The fund manager’s track record is equally important for assessing the fund’s investment strategy. Always choose reputed funds that have shown consistency over the 5 to 10 years .
7. Not Reviewing and Rebalancing Your Portfolio :
Ideally, you shouldn’t track investments daily, but neither should you invest and forget. Reviewing mutual funds annually helps investors track returns, manage risks, and adapt to changing financial circumstances. An annual review will assist in course correction and rebalancing portfolios,making it best investment plan reducing the chances of making mutual fund investment mistakes.
Conclusion :
Successful investing is not just about picking the right funds, but also about being disciplined and consistent. With the right strategy, patience,discipline and choosing best sip to invest in mutual funds can play a vital role in helping you achieve long-term wealth creation and true financial freedom.
FAQs :
1. Is SIP safe?
Yes, SIPs are generally safe as they allow you to invest small amounts regularly, average out market volatility through rupee cost averaging, and build wealth over time.
2. Can I stop SIP anytime?
Yes, you can stop a SIP anytime without penalty. However, stopping it may affect
3. How many funds should I invest in my portfolio?
For most investors, 3–5 well-diversified funds are sufficient to create a balanced portfolio.
4. Does a mutual fund guarantee returns?
No, mutual funds do not guarantee returns since they are market-linked. However, over the long term, mutual funds have the potential to deliver higher returns compared to traditional savings instruments.