Investors ALERT! Save your money, banish losses, take this big step to get as much as 5% more in profits

The first thing in an investor's mind, at the time he is about to choose an option where he will put his money, is whether this may actually lead him to lose it. The amount of profit to be gained is secondary. Yes, investors can make huge losses and to prevent that from happening, they must not do certain things. This will ensure that they book big profits rather than losses. And what has to be done by investors to improve their chances of making huge amounts of money? We explain below:

First of all, shun direct investments in equity as much as possible. The risks are massive. They should instead opt for mutual fund investment, which is for those who have a lower risk appetite in comparison to the direct stock market investors. According to the investment experts, mutual fund investment is mainly done by those who want the kind of big returns that equity markets generate, but at a lower risk. Mutual funds work this way: When the market is low, an investor gets higher NAVs. At the time stock market is at higher levels, the investor will get NAV allocation on a lower basis. Significantly, at the end of the investment period, when the investor gets his money back, the returns is on the basis of net NAV allocations, which means the average performance of the stock market.

Speaking on the risk factor that gets lowered by investment in mutual funds, Kartik Jhaveri, Manager — Wealth Management at Transcend Consultants said, "When someone invests in mutual funds, he or she would get the NAVs on the basis of the stock levels at the time of investment. But, in mutual funds, one has the luxury of availing fund manager's services whose job is to outperform the stock market. These mutual fund managers enhance the investor's return by 2.5 per cent to around 4.5 to 5 per cent. So, mutual funds, especially the small-cap equity mutual funds may give better returns in comparison to the direct stock market investment."

Elaborating upon how does the mutual fund investments lower the risk factor when compared to the direct share market investments, Poonam Rungta, Mutual Fund expert at LJ Business Schoool said, "Stocks are riskier than mutual funds. By pooling a lot of stocks in a stock fund or bonds in a bond fund, mutual funds reduce the risk of investing. That reduces risk because, if one company in the fund has a poor manager, a losing strategy, or even just bad luck, its loss is balanced by other businesses that perform well. This lowers the risk, thanks to diversification. For that reason, many investors feel that mutual funds provide the benefits of stock investing without the risks."

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For example, any fund in 2008 that held Lehman Brothers stock would have declined with the bank’s demise during the global financial crisis that virtually destroyed the financial system across the world. But investors who held only Lehman Brothers stocks would have lost their entire investment.