How many times have we seen/heard this statement?
‘Mutual fund investments are subject to market risk. Read all scheme related documents carefully.’
Every advertisement about mutual funds carries this statement. Although mutual funds offer broader diversification and value for money, there are a few risks associated with investing in them. But, first of all, what is ‘Risk’?
In layman terms, ‘Risk’ is the possibility of losing money on an investment. Mutual funds in general invest in various types of financial instruments such as equities, debt, corporate bonds, government securities etc. Each of these instruments carries a different amount of risk. For example, equities carry a higher amount of risk i.e., The fluctuation in prices of equity will be high, which may result in losses in the short term.
How much risk should you take while investing in mutual funds?
Actually it depends on a lot of parameters: the time horizon of investments, ability of the individual to absorb losses, past investment exposure, expected returns, income, assets and liabilities etc. In short, it depends on the individual’s ‘Risk Profile’.
At Niyo Money we offer a feature, through which you can find out your risk profile and invest accordingly. Check your risk profile by clicking on the ‘Risk Profile’ option from the Menu of Niyo Money app and invest wisely.
Oh and another question - In terms of investing, what would be your expected risk profile?
- Low - Slow & steady wins the race!
- Moderate - Keeping it real!
- High - I’m a daredevil when it comes to investing!