Mutual Fund Schemes: Why Choosing on Your Own Could Cost You Higher Returns

When it comes to investing in mutual funds, most people rely on advice from friends, relatives, or online articles. At first glance, this may not seem like a problem. But on closer look, it often leads to missed opportunities for higher returns. The reason is simple—every mutual fund scheme carries a different level of risk, and not all of them match an investor’s financial goals or risk appetite.

Why Picking Schemes Randomly Can Hurt Your Returns

The mutual fund market offers hundreds of schemes across equity, debt, hybrid, and other categories. Choosing one without considering your long-term goals, risk-taking ability, or investment horizon can backfire. For example, if you invest in a high-risk equity scheme without having the patience to stay invested for the long term, you might panic during market downturns and exit at the wrong time. Similarly, putting short-term savings into equity funds could expose you to unnecessary risk.

On the other hand, aligning schemes with your investment goals makes the journey smoother. If you are saving for retirement, children’s higher education, or buying a home, your portfolio should reflect these timelines and risk levels. Equity funds usually work well for wealth creation over decades, while debt funds are better suited for short-term stability.

How Financial Advisors Add Value

Many investors hesitate to consult financial advisors because of the fees involved. But the truth is that the cost of professional advice is often far less than the gains you can achieve by making the right choices.

There are two main types of advisors:

• Tied advisors: They work for a specific mutual fund house and may recommend only that company’s schemes.

• Independent financial advisors (IFAs): They charge a fee but provide unbiased advice tailored to your risk profile and goals.

Advisors also monitor your portfolio regularly, suggesting changes when market conditions or personal circumstances shift. This ongoing support helps optimize returns and reduce risks.

Balanced Portfolios Deliver Better Results

Investment is a long-term process, often spanning 20–25 years. Over this period, even small decisions can significantly impact wealth creation. If your portfolio is balanced from the beginning—diversified across equity, debt, and other asset classes in line with your goals—you won’t feel the need to halt investments abruptly.

Market conditions, however, do change. Advisors often recommend rebalancing portfolios to adjust for domestic or global events. These tweaks help minimize risks and improve overall returns.

Why Monitoring Matters

External and internal factors—like policy changes, global trade disputes, or interest rate hikes—directly affect fund performance. For instance, if the U.S. imposes tariffs on generic drugs, pharma-focused funds may suffer. An advisor can help you reassess and adjust your investments in such scenarios.

Regular monitoring ensures your portfolio stays aligned with your financial roadmap and shields you from sudden shocks. This not only maximizes growth potential but also provides peace of mind.

The Bottom Line

While choosing mutual fund schemes on your own may seem easy, it can lead to mismatched investments and lower returns. Professional advice helps you pick the right schemes, align them with your goals, and adapt to changing conditions.

If you want to build wealth steadily over the long term, start with a balanced portfolio, review it regularly, and seek expert guidance when needed. Remember, in investing, informed decisions always outperform random choices.