Aren’t Mutual Funds Risky?

Although Mutual funds are regulated by the Securities and Exchange Board (SEBI) of India,  people are skeptical of investing their money in Mutual Funds. The reason for this phenomenon is “Safety of your investments”. Since Mutual Funds are linked to the market, investors doubt the safety of their funds and the guarantee of their returns. This article addresses the concern and lists out reasons to prove that investments in Mutual Funds are safe even though they are risky:

Regulated

As stated before, SEBI regulates Mutual Funds with the intention to protect the interests of the investors. SEBI sets guidelines that help investors in comparing various funds and also have categorized Mutual Funds into – Equity, Debt, Hybrid, Solution Oriented, and Others. This makes the entire system simplified and uniform.

Diversification

Mutual funds have definitely capitalized on the quote “Don’t put all your eggs in the same basket”. Mutual funds wisely invest your funds in various instruments such as stocks, bonds, company shares, etc. Thus reducing the risk that could arise from investing in a single stock.

Reduces Risk

Mutual Funds are managed by Professional Fund Managers. They make decisions regarding the buying and selling of funds based on research and abide by the standards set by SEBI. They constantly evaluate the investments and address risk by diversifying asset portfolios.

Inflation-beating returns.

Mutual Funds account for inflation. The inflation rate in India has been between 4% – 7% and with Mutual Funds, investors have the potential to earn more than 15% in returns, which easily beats inflation. Thus the real interest rate (i.e. nominal interest rate – inflation i.e. 15% – 7%) is more in Mutual Funds when compared to FDs.

Flexibility

Emergencies such as accidents or health issues are uninvited guests in anyone’s life. One way to face them is to be able to access your money easily. With Mutual Funds, you can withdraw your funds anytime and the amount gets credited to your bank account. Also with Fisdom , you can invest for a specific goal (retirement, child’s education/ marriage, vacation) or just park your money aside with 3-year investments.

A fund for every investor.

Investment decisions have to be made based on the investor’s risk appetite & investment horizon and with Mutual Funds that is possible. Mutual Funds provide tailor-made funds that suit your financial needs. Right from short term funds to long term funds, Equity Funds (High risk, high returns) to Debt Funds (low or moderate risk and returns), you can find them all under one roof of Mutual Funds.

“Everything you want is on the other side of fear” — Jack Canfield

Now that we know Mutual Funds are not as risky as they seem to be, let’s overcome the fear. Don’t Delay – Invest Today!