Higher Exposure to Thematic Funds/High Allocation to Exciting Themes
Investors tend to get enticed by exciting themes like Defense, FinTech, Infra and EV, and end up with high allocation in those funds. Around 90-95% of thematic mutual funds underperformed Nifty 50 over the past year, according to Ace Equity data.
Risk-Averse Investors with Under-diversified portfolios
Investors tend to find it safer to invest in large cap or index funds and end up with a highly under-diversified portfolio, but the reality is active large-cap mutual funds, about 60-70%, tend to Underperform the benchmark indices like Nifty 50 or Nifty 100 in recent years.
Focused on timing of investments and fund selection rather than asset allocation
Most mutual fund investors tend to focus on exciting aspects like timing the markets and fund selection rather than smarter and well-suited asset allocation that has proven to be the differentiator and the leading factor in market beating returns
Not having a reliable advisor, financial planner or mutual fund distributor with expertise
Many investors are misled and fall prey to believing and acting like market experts and choose direct plans through trading applications, which leads to little to no oversight, no periodic reviews, lack of effective rebalancing and choosing funds based on past performance without any metric to gauge their future performance.