Top mistakes to avoid while investing in Debt Funds

• Aimless Investing: Defining a SMART goal before investing will not only help you in assessing your risk appetite but also in selecting the best funds for your needs.
  
  
• Making rash decisions: Short term outlook must be avoided and the investor must stick to his goals even during bullish/bearish markets.
  
  
• Using only NAV as an indicator of fund performance: Never buy a fund solely on the basis of its NAV. Its performance is also affected by factors like management decisions, portfolio holdings, etc.
  
  
• Ignorance of Taxation rules: This leads to lowering of the return earned by investors as they pay more taxes such as not taking benefit of indexation
• Lack of review: Not reviewing fund performance in a timely manner can lead to losses.
  
  
• Low credit rating: If an investor invests in a debt fund with securities having low credit rating, there are higher chances of default, leading to loss of interest and principal.

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