Mutual funds सही हैं पर सेफ नहीं है। रिस्क तो है।
Mutual fund investors are lured into investing in mutual funds, assuming it is safe, and when the market starts to correct, they see too much red in the portfolio.
The investor should not be under the misconception that an equity mutual fund is a cushion against the risk of investing in stocks.
The difference between stocks and a mutual fund is that mutual funds reduce investment risk in one stock or management. In addition, they diversify the risk to reduce volatility.
The return from mutual funds tumbles when the stock market as a whole takes a nosedive. So, for example, we can’t rule out a fall in NAV by 40 – 50 per cent if the underlying indices fall around the same level.
If the market is bearish, there is very little that a fund manager can do to avoid the losses.
However, unlike direct stock investments, a mutual fund allows exposure to more than one stock. Moreover, the fund manager can hold cash, enabling to handle the market volatility more effectively.