Profits Often Involve Risks

I often come across advertisements for mutual funds from various fund houses and regulatory bodies, urging people to invest in this tool. But they always have a disclaimer in the end, which says that mutual funds are “subject to market risks and we should invest after considering all the factors.” However, very few know what these market risks are let alone understanding them. I will very briefly touch upon these market risks so that my gentle readers are aware of them while investing in mutual funds. Let us look at equity funds first. They involve primarily risk of capital loss, volatility and inflation. Risk of capital loss happens when the principal invested loses value due to fluctuations in the markets. However this is a normal phenomenon and is rectified by staying put with ones investments until the principal returns back to the earlier levels, which is bound to...