Financial health is wealth, quite literally so. You’ve dived into the mutual funds market to meet your unique financial goals, and remember – every single decision counts (no decision is, in itself, a decision). Well-informed investors take healthy actions and build solid portfolios. Conversely, hasty investors act on an impulse that may later lead to regrets.

Though uncertainty is always served on the platter of the MF market, you are not obliged to pick it. Here are some questions you can ask yourself to understand whether your investment actions are healthy or toxic.

1. Have you taken on more risk than you can endure?

Every investor has a unique risk profile. What’s yours; low, moderate, high? If you are a risk-averse investor, choosing equity funds can push the risk factor beyond your endurance limit. Conversely, investing in debt funds with a high-risk profile will make you lose out on market opportunities. Generally, a well-balanced portfolio (mix of equity and debt funds) mapped to your risk profile is the way to go.

2. Do you consider the total cost of your investments?

The amount you pay to purchase units of an MF scheme is not the end-all of investment costs. Other charges such as transaction fees, exit loads (usually applied for equity funds if holding period is less than 1 year), etc., are also levied. Make sure you calculate the total cost of your investments.

Additional Read: Safe investments to ride out market volatility

3. Does your portfolio align with your investment goals?

All the top-performing mutual funds in the world cannot save you if your portfolio is not tailored to your unique investment needs. For instance – If your goals are long-term such as retirement planning, the greater half of your portfolio should be invested in equity funds. If you’re only in the market for the short-term, focus a higher portion of your investments on debt funds.

4. Are you planning to sell off units simply due to bear markets?

Or have you made it a practice to call it quits when the market is down? If yes, this investment action of yours is toxic, especially if your horizon is long-term. Bearish markets are opportunities to purchase more units at lower costs so that you can later benefit when the market is at its peak. Selling off prematurely will only lead to losses.

Additional Read: How to Select the Best Funds to Invest in Mutual Funds Online?

5. Do you rebalance your investment portfolio periodically?

If not, you’re jeopardising its health. Generally, market changes disturb the asset allocation of your portfolio, sometimes to the extent that it may be wholly misaligned to your investment goals. At least once every six months, review your portfolio mix and restore it to its original asset allocation.

Want to redeem some of your investment mistakes? Whether you’re looking to diversify your portfolio or purchase top-up units to make the most of the current bear market, Tata Capital’s Moneyfy app can help with them all. Browse through the top picks of the day, compare the features of each fund, get personalised recommendations, and ensure your investment actions are sound and healthy. Download the Moneyfy app today!

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