Jan 04, 2017 3 min read

How Safe are Mutual Fund Investments?

Safety is of great importance while investing the funds in any investment strategy. Here you will get to know how mutual fund assures the high safety of your invested capital.
Investing in mutual fund plans is certainly the most beneficial avenue to earn maximum profits. Although there are various risk factors which are involved in investments, Mutual Funds ensure resolving the same. Here, in this blog, we will learn about the several risks involved in investments and how mutual funds overcome them to play safely in the industry.

The research studies related to investments throughout the years have confirmed that the general tendency of the investors' group is on focussing the return factors. On the flip side, the risk factors which can not be ignored must be taken into consideration in every decision-making process. The major risks involved in mutual fund investments are as under:

  • Interest-Rate Risk:- This is a type of risk which is caused due to the market fluctuation and government policies. When RBI makes changes in the interest rates, the entire investment gets affected and there rates get fluctuated. This causes a great impact on the values of the invested capital.
  • Business Risk:- Business risk involves the risk factors which are associated with the nature of schemes or avenues in which the funds have been invested. It is based on the probability that the investments would be able to generate the expected yields over a period of time.
  • Inflationary Risk:- This refers to the purchasing power risk. As the time passes, the inflation rates fluctuate causing a great impact on the purchasing power of the individuals. This also affects the investment values.

These major risk factors which cause a great impact on the values of mutual fund investments need to be considered thoroughly to gain substantial income over a long-term of period. The mutual fund programmes which are designed after considering several relevant factors assure that these uncertainties that might cause an inverse affect on the investment values shall be mitigated. Here are some of the characteristics that help in overcoming the above-mentioned uncertainties:

  1. Diversification:- It is always recommended not to put all the eggs in one basket; which is quite obvious as well. The reason is that their chances of getting damaged at the same time increases. In the case of mutual fund investments, the same phenomenon is considered and followed. By diversifying the funds into several investment avenues or sectors, mutual fund ensures the mitigation of the associated business risk.
  2. Beat Inflation:- The purchasing power of an individual falls down with an increase in the rate of inflation over time. The banks offer lower interest rates as compared to the mutual fund investments and thus the inflation-related risk gets hampered for the growth of capital. By investing the hard-earned monies in the mutual funds, one can make sure the better management of the capital and expect higher growth or wealth over a long period of time.
  3. Expertise:- The fund managers of asset management companies provide a high degree of efficiency and expertise for designing the effective mutual fund programmes. Their experience acts as a strong determiner for reducing the risk factors and thus ensures higher profitability.
  4. Low Cost with High-Return Potential:- The cost involved in buying a mutual fund investment programme is quite lower and does not create a burden on the investor. Furthermore, the programmes which are formulated after evaluating market moves and other relevant factors ensure the potential of generating greater returns.

Accordingly, one can easily contemplate the answer to the question, asked in the title of this blog, i.e., “How Safe are Mutual Fund Investments?” It is safe to park your money in these investment avenues as you can ensure the accomplishment of your financial goals in a feasible and safe manner. The transparency offered by mutual fund programmes further help in ensuring high security of the funds invested in them.

Our financial experts keep a keen watch on the functioning of all the mutual fund programmes, and thus they believe them to be the safest mode of generating huge wealth over time. If you too need advice for parking your money to create a corpus, then you must get in touch with us. MySIPonline has various solutions and online services to serve you better while investing.

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