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A beginner's guide to mutual funds - 4

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Don't start with the wrong question
Often the question is framed wrongly. It is always about should I invest in direct or regular plan in a mutual fund scheme. Ideally, one should ask: can I handle my investments? If yes, you should proceed to invest in direct plans.
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It is not an easy task
However, you should answer this question honestly. Do you understand about investing in mutual fund thoroughly? Do you have the time (or inclination) to do some research on mutual funds to choose the right mutual fund schemes for you? Would you be able to keep track of the performance of your schemes and sell the long-term poor performers? If yes, you can be a do it yourself or direct investor.
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Do not count on free advice
Did you say I can manage my investments with the help of free advice from some nice people or experts online or offline? That is a slippery slope. When you are asking your queries online or offline, mostly you offer incomplete information. A single line should I buy or sell this scheme would fetch an answer, but it need not be a personalised advice.
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Can you handle a downturn?
Most investors are confident of handling their finances when things are going well in the market. However, an unexpected crisis in the market make them very nervous. For example, the recent defaults and downgrades in the debt mutual funds unnerved many investors. Similarly, the large losses in small cap and mid cap schemes was a shock to many investors. It is natural to be nervous, provided you do not take any impulsive investment decisions based on it.
No, we are not discouraging youGetty Images
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No, we are not discouraging you
Some of you would think that we are trying to discourage you from your adventure of direct investing. Not really. In fact, ETMutualFunds.com would love that, as you would visit us more to keep yourself updated. However, we sincerely believe that investors should invest in direct plans only if they have a sound knowledge about investing in mutual funds and disciplined enough to take care of their investments.
Also read:
A beginner’s guide to mutual funds - 1
A beginner’s guide to mutual funds - 2
A beginner’s guide to mutual funds - 3
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