What is the risk of investing in Mutual Funds?

What is the risk of investing in Mutual Funds?

The following risks are associated with investing in Mutual Funds, 

  • No investment is entirely risk-free, including mutual funds, which typically invest in low-risk securities.
  • Consider the following risk factors before investing:
  • Returns are not guaranteed, including income distribution, returns, or capital appreciation.
  • Market risk is inherent and influenced by economic developments, governmental policies, regulatory changes, interest rate fluctuations, investor sentiment, and external shocks.
  • Security-specific risks, such as defaulting on debt repayments or credit rating downgrades, can affect individual securities.
  • Liquidity risk arises from the ease of selling securities at fair value based on market trading volume.
  • Inflation risk may erode the purchasing power of investments due to rising consumer prices.
  • Loan financing risk entails potential gains or losses, fluctuating borrowing costs, and the need to manage collateral and outstanding loan amounts.
  • Non-compliance risk involves legal and regulatory non-conformance, impacting the mutual fund and investor interests.
  • The manager's risk is associated with the fund manager's expertise, knowledge, and investment strategies, which influence fund performance and investor outcomes.

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