Why people lose money in best performing funds

Why Do So Many People Lose Money in Top-Performing Mutual Funds?

 

I have observed that a lot of people tend to lose money on their investments in top performing funds. The reason is not the performance of the fund but the temperament of the investor himself. You would think why would an investor lose his/her money in the best performing fund.

 

The reasons can be plenty but I would highlight some of the reasons below:

 

  1. It’s because of investor’s inability to hold onto his/her investments for a long period of time. By saying a long period of time, I generally mean a minimum time span of 10-15 years. You need to give at least this much time to your investments in order to build a huge wealth.
  2. Secondly, I believe that people tend to buy when the markets are rising. They prefer to buy in the bull markets when the prices are too high and sell them in panic whenever a crash happens.
  3. Apart from that, people generally get impatient and sell their investments in a year or two if they don’t get to see much appreciation in their wealth. They need to understand that building wealth is a long-term process. Even a baby can’t be produced in one day.

 

The thumb rule is: Unless you don’t learn to sit tight on your investments and sell them in panic, you’ll keep on losing your money.

 

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