Mutual funds are subject to market risks..!?  What does it mean..?

In the past few years, mutual fund investments have become popular among the people and there are reports that mutual fund investments are increasing every year. It is noteworthy that mutual fund investments do not have the risks of other investments including the stock market and not only that, investors also have the confidence that there is no risk to the principal of the invested investment. However, all mutual fund advertisements state that mutual fund investments are subject to market risks. Now let's see what this means.
Mutual fund investment is of two types namely lump sum investment and SIP which is a fixed amount invested every month. It is noteworthy that many people are getting involved in mutual fund investments as they are giving around 10 to 12 percent profit every year. However, advertisements for mutual fund investments state that mutual fund investments are subject to market risks. Now let's see what it is. There are five types of risks involved in mutual fund investments. They are credit risk, business risk, market risk, price risk, and liquidity risk.
Although there are these 5 types of risk in mutual fund investment, it cannot be said that all these five are present in mutual funds of the same company. It is important to note that every mutual fund scheme that we choose is likely to carry some risk. However, the fund management team will try to manage these risks appropriately and prevent losses to the investors. This risk depends on the type of mutual funds we have invested in. Some investments have higher risks and some investments have lower risks. Mutual Funds with expert management team help, diversified investment, and the regulatory framework of the SEBI system help to reduce risks.
An important question that many investors may ask at this stage is whether mutual fund companies will take away our invested money and run away. Economists are of the opinion that this is not possible considering the strict rules in the SEBI regulatory framework and the structure of mutual fund investment.

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mutual funds

Sowmiya Sriram

12/08/2022 11:45 AM