The mistake most small investors make with Mutual Funds in general is that they enter at the wrong time (generally when the markets are booming), which means that they buy it when the valuations in general are pretty steep. So when the markets correct, they end up making a loss. In order to avoid entering at a high point, one should opt for SIP (Systematic Investment Plan) of the MF scheme which they want to invest in. This way one can ensure that the cost is averaged out. This happens because in a SIP, your investment is getting spread out over a few months (atleast 6 months or more). Thus, an X amount gets invested every month irrespective of the market levels. Say for example Rs.1000, then if the markets are low you buy more number of units and if they are high then you buy lesser number of units with the same amount. Thus, you making sure that you are buying more when valuations are low and buying less when the valuations are higher.
