Financial advisors are aware about the impact of market volatility on their clients. However, at times even though the markets are doing well, the performance of mutual funds may not be encouraging due to various factors. Clients tend to panic in such situations and take the wrong decision. As an advisor you should discourage your clients from making these common mistakes


1. Discontinuing SIPs
Investors who commenced SIPs in funds belonging to mid and small-cap segments might think of withdrawing from these investments since they are making losses. According to experts, this is not a wise decision. On the contrary, financial advisors must encourage such clients to make the most of this market instability by buying more units at lesser costs for the same amount. Make them understand that investors who stick to their SIPs regardless of market fluctuations will earn more returns as compared to those who let market volatility affect their choices.


2. Getting drawn towards mutual funds for dividend
For a long time, dividend income drew many investors to park their money in mutual funds. However, now this attraction comes with a 10% tax label. With long-term capital gains tax levied on dividend, the proposal may not be tax efficient anymore. Financial advisors should suggest clients who are still interested in earning dividend to think again and put their money in other investment vehicles.


3. Being too confident about stocks
Feeling too bullish about the stock market can result in making unsuitable choices which can affect clients’ objectives. Financial advisors must explain to clients that the best way to create wealth is through appropriate asset allocation instead of only timing the market. They should help clients develop the right balance between equity and debt. In addition, you must ensure that they stick to the plan and shift funds periodically after careful assessment.