Financial experts Hemant Rustagi, CEO of Wiseinvest, and mutual fund expert Vishwajeet Parashar have identified 5 common investing mistakes that investors should avoid, especially during volatile market phases. According to their analysis on Zee Business, investors frequently damage their portfolios not because of market crashes, but due to avoidable mistakes in portfolio construction and investment behaviour. Market volatility often pushes investors into making emotional decisions that can hurt long-term wealth creation, as reported by the experts. Recent analysis from Finance Paulified Episode 66 reinforces this point, highlighting that fund returns are shown on Excel sheets, but investor returns depend on behavior - specifically, how investors react to market movements. Ashish Anand, Partner at Fortuna Asset Managers, emphasizes that "the larger potential threat to an investor getting started in the current market will be driven by events in the news and not the market itself."
Holding too many mutual funds represents one of the biggest mistakes investors make, according to Rustagi. Investors often keep buying funds recommended by friends, neighbours or trending market discussions, resulting in portfolios with 30-40 funds or even more. While mutual funds are already diversified investment vehicles, owning too many funds reduces effective allocation to quality schemes and makes monitoring difficult. The experts warned against portfolio overlap, where multiple funds hold similar stocks and behave similarly in both rising and falling markets, as reported by the experts. Recent analysis from PrimeInvestor reveals the mathematics of portfolio construction, noting that a portfolio that falls 50% needs a 100% gain just to return to its starting point, making falling less than the benchmark a compounding advantage. Pulak Prasad of Nalanda Capital formalized the insight that "the biggest gains in long-term outcome come not from finding more winners, but from making fewer bad mistakes," emphasizing that "the biggest gains in long-term outcome come not from finding more winners, but from making fewer bad mistakes."
Chasing trends and timing the market is another common mistake identified by Parashar. Investors often develop a fear of missing out (FOMO) when sectors such as PSU stocks, gold or thematic funds rally sharply. However, by the time retail investors enter such themes, valuations are often already elevated. The India VIX, the market's fear gauge, measures expected volatility in the market, and when it spikes, investors tend to get cautious. Ashish Anand warns that "consistently timing the market bottom is almost impossible" and that "experienced investors often fall for the trap of thinking they can buy at the lowest price." Recent analysis shows this pattern continues, with investors becoming greedy during bull runs and panicking during market falls. At PrimeInvestor, portfolio construction begins with the question "What role does this play, how large should it be, and what should sit alongside it?" rather than simply "Is this a good idea?"
Stopping SIPs during market corrections is a critical behavioral mistake where investors feel they are "losing money" when their portfolio falls. However, falling markets often allow SIP investors to accumulate more units at lower prices. Kresha Gupta, director and fund manager at Steptrade Capital, explains that "SIPs are designed to work through market ups and downs. Pausing them during volatile phases disrupts the discipline that makes long-term investing effective in the first place." The experts advise that investors should focus on whether their investments still match their financial goals, risk appetite and time horizon rather than reacting to every market move. Recent market behavior analysis shows this pattern continues, with investors becoming greedy during bull runs and panicking during market falls. At PrimeInvestor, analysis of over 15,000 portfolios representing more than ₹25,000 crore of assets shows that "the biggest gains in long-term outcome come not from finding more winners, but from making fewer bad mistakes."
Poor diversification can hurt portfolios in two ways—over-diversification and excessive concentration, according to Rustagi. Many investors increase equity allocation aggressively during bull markets without assessing their actual risk-taking capacity, while becoming too conservative during market corrections and shifting long-term money into safer assets. The experts stressed that asset allocation should align with investment goals and time horizon rather than the current market mood, with disciplined investing, regular review, proper diversification and staying invested for the long term remaining key pillars of successful wealth creation. Ashish Anand recommends keeping at least a five-to-seven-year horizon for equity investments, noting that "market recoveries are usually unpredictable" and investors who stop investing during panic phases often miss the rebound. For cost-conscious investors, direct mutual fund plans offer significant advantages over regular plans, with differences of roughly ₹3-4 lakh over 15 years for a ₹5,000 monthly SIP, assuming similar returns. However, even investors who are savvy on costs still struggle with building real wealth through mutual funds and stocks, as portfolio outcomes are shaped by much more than fees. At PrimeInvestor, analysis of over 15,000 portfolios representing more than ₹25,000 crore of assets shows that "the biggest gains in long-term outcome come not from finding more winners, but from making fewer bad mistakes."
