Risks could be controlled. And Mutual Funds can be rewarding!
When we say “RISK” in investments, a few questions immediately arise in the mind of the investor… “Is my money safe?” ”How much return will I get?” “Will I get my money back when I want it?”… While, all these are very valid questions, let’s look at them from three angles to understand Mutual Funds better
Professional Fund Management - Mutual funds are managed by professional fund managers and as an investor, you benefit from their research and expertise. While this may not completely eliminate risk, it certainly lowers it.
Diversification – Mutual Funds invest in a basket of securities. Diversification helps in minimizing the risk from a specific security’s under-performance.
Select a Scheme In Line With Your Investment Objective - If the time horizon of the investment is in sync with the fund selected, you protect yourself from very short term fluctuations. For example, if you have invested in an Equity Fund, you may be affected by short term fluctuations, but over a longer term, you would be more likely to get the long term returns associated with equities.
Most people believe that Mutual Funds are risky possibly because of the standard disclaimer they come across in the Mutual Fund advertisements. It’s important to remember that the stringent regulations that ensure investor protection, professional fund management and diversification mitigate it to a large extent.