how risky is mutual funds?



If suppose I invest in good equity diversified mutual fund (8 or 10 equity diversified 20000…

rs in each ) and suppose if the NAV fall of 50% of any of 4 mutual funds so it will be the loss continue for next 5 years or the NAV may increase after some times also say is there any chances that my investment of 20000 rs each may turn to zero( 0 ) rs , is the equity diversified mutual fund so risky , please reply my email id is [email protected]

how risky is mutual funds?
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11 Replies to “how risky is mutual funds?”

  1. Theoretically, yes your investment may turn to zero. But practically its chances are very rare.
    But Equity Oriented Mutual Funds are as risky as Equity shares But, they provide nice returns too. Its just that Mutual Fund Managers collect funds from public and invest them in Equity shares and distribute the profit (Dividend/Gain on shares) or even losses, to units. They also charges some Fund Management and Administrative charges.



  2. It seems you have not understood the basic concept behind the Mutual Funds.

    When you invest in the mutual fund your are investing in the stocks (buying the shares). What share to buy and for how long to keep them is decided by the fund manager.

    You as an investor buy units of Mutual fund, cost of which is derived by the value of the total stocks held by the MF divided by the total number of the units issued. This unit price is know as NAV.

    Every day price of the shares rises or falls therefore correspondingly the NAV of the fund also changes. NAV is calculated on daily basis.

    Every MF carries risk associated with investment in the market.

    Yes, theoretically your invest can be reduced to zero also. But it can happen only if the value of all the shares drop to zero. For this reason only, ppl who are not well versed with investing directly into the share market advised to invest thru MF route so the Fund manager could take timely decision and help salvage the position and reduce the risk / loss to minimum.

    If the NAV of fund is dropped by 50% there is no reason that it will not recover in the next 5 years it may turn positive in couple on months as well it all depends on the market conditions.

    RainMaker

    http://nifty-rainmaker.blogspot.com/


  3. Your chance of loosing it all is very minimal. About zero in fact. However, your chance during any given year of loosing about 1/2 your investment is about 20% maybe. Over a long period of time (5 years) if you purchase a good fund you should expect to at least break even. The way the Indian economy is growing you should do well. Reliance Regular Savings Equity during the last 5 years has returned an average of 25% annually but it did loose 54% during 2008. That is a very important statistic to understand. It is or rather has been a good equity diversified mutual fund.


  4. Dear
    8 to 10 e diversified fund ? Now no need to run behined ED there are many sector funds ,banking ,fmcg,pharma,telecom ,entertainment,auto ,energy,mining,gold,agri etc… = ED.
    For your Q answer is YES and NO.
    START INVESTING DONT SCARE.


  5. If you are investing in mutual funds – you do not require 8-10 funds.

    4 – 5 funds will do.

    Visit http://www.valueresearchonline.com to understand mutual funds.

    You can split the total amount and invest into 5 funds via sip.for 12 months.

    1) HDFC TOP 200

    2) DSPBR TOP 100

    3) DSPBR EQUITY

    4) IDFC PREMIER EQUITY PLAN A

    5) Reliance Regular Savings Equity.

    These are good rated funds with a good track record. In the long run you can expect about 12-15% compounded return. Mutual funds are less riskier than shares.


  6. mutual fund as per their plan invest in shares,bonds and liquid assess ts.
    due to fall in market a nav might be less than face value and on upward trend it might increase.
    but rarely a investment turn to zero as the fund messenger always invest in sound companies.


  7. Mutual Fund investment is investing indirectly in Shares. Hence it is definitely associated with and subject to risk. The MF Manager invest in different types say on Large Caps, Midcaps ,Small caps , bonds etc which itself specifies the percentage of risk. Hence you can assure the percentage of risk by going through the investment strategy.
    However if you are patient and excise few cautious steps you can become lakpathi/crorepathi easily overcoming the risk.
    1.Never invest in lump sum.
    2.Invest through SIP . Say Rs.1000/ pm under a scheme preferred by you (the range of equity percentage is the range of risk taken by you)
    3. Whenever the sensex/nifty indices selectd by you say index number /or midcap /smallcap/bank / metals/infrastrfucture decreases kindly add addition in multiples of Rs.1000/- to your portfolio. In due course you will be a crorepathi.
    4.Please donot aim high returns in shorter duration .
    5.Aim for ten to twenty years slow and steady investments.
    6. Never panic if stock market crashes


  8. When an investor invests in a mutual fund, it is almost like he or she is buying stock in the company that manages the mutual fund. Basically, the fund manager uses money contributed by investors to assemble a portfolio of assets based on the specified investment strategy.

    Everyday, the fund publishes the NAV of its portfolio, which is the price per share at which an investor acquires money (note that there is a minimum investment required, usually around $ 2500).

    Therefore, mutual funds are as risky as the class of assets that it invests in. For example, let’s say a mutual fund invests in technology stocks. In that case, the risks of this fund are similar to the risks of the technology sector. Same goes for a mutual fund that invests in high-yield bonds (i.e. junk bonds). The risks of this fund are the risks of the assets themselves, which are bonds.


  9. the investors are not fair enough then they will invest for personal benefits and some for miscalculations i invested in franklin high growth companies and sbi one india funds both failed miserably


  10. Well I Suggest that Invest your money in SIP form. So you will always get benfit of Market when it down or up i.e by getting more units when its down and Increase in NAV when it is High. By this you can smartly invest and take good returns on your Investment. This will make your risk as a divesify and gets more fruits in form of Return on Investment.





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