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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