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Even before we ask what mutual funds are, we tend to ask if mutual funds are safe? Is it safe to invest in mutual funds? How risky are mutual funds? And it's natural to be cautious and wary of any investment avenue that you are new to.
In this blog, we will answer some of the most common questions that people have about mutual fund investments and the risks involved.
In a word "No". Although, safety is a relative and subjective term in the world of investments - therefore whether mutual funds are a safe investment or not is more than a simple yes or no question.
We need to understand exactly what makes mutual funds safer than other comparable investments. We will also cover the risks involved in mutual fund investments.
Generally in India investors have favoured Fixed Deposits and Recurring Deposits or simply let their money sit in a savings account. However, not investors are waking up to the realisation that Mutual Funds can be more rewarding and pose little to no risk. You can consult a Cube Wealth coach or download the Cube Wealth App.
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When you invest in a mutual fund you're not investing in a single company's shares. A mutual fund is managed by one or more experienced fund managers. These individuals invest the funds capital multiple company's to reduce the risk of loss.
So, if you invest through a trustworthy wealth coach who is affiliated to a known brand like Cube Wealth, your money is in safe hands. What you must ensure is that you don't invest through individuals who promise high returns but do not clearly explain how.
For example, when you invest using Cube Wealth you have complete control over your investments. This is the kind of transparency that a good mutual fund investment app must offer.
So broadly speaking, things that make mutual fund investments through an app like Cube Wealth safe are:
No investment is 100% risk-free - even those that are advertised as completely risk-free will have some risk involved. Mutual funds like any market-linked investments depend on how the financial markets perform.
However, since your investment is spread across multiple companies, your chances of losing money are exceptionally low. Moreover, you will likely have more than one mutual fund in your portfolio - which means the risk is further distributed across funds.
A good wealth coach can help you diversify smartly across various types of funds to reduce this risk even further. So, if you've invested smartly and in the right funds, you will likely reap healthy returns.
The one risk that any investor faces across the board is that of a market-wide crash - this is rare and is a symptom of recessions. In a recession, your mutual funds will likely lose value. However, if you stay consistent and invest through the recession you will still be able to get good returns when the economy recovers. You can consult a Cube Wealth coach or download the Cube Wealth App.
There are equity mutual funds, debt mutual funds, hybrid mutual funds and more. Depending on the type of mutual fund you've invested in your average returns in the long term (5 Years +) can vary between 6% to 12%.
This number can higher or lower depending on your investment period, horizon, whether you take the lump sum route or the SIP route etc.
There are many good mutual funds that you can invest in if safety is your primary concern. As a risk-averse investor, you could invest in debt funds, hybrid funds or even equity funds that have historically had a great track record.
To get specific fund advice please Download The Cube Wealth App
Long story short, Yes. If you're planning to invest your money in any financial markets then mutual funds are perhaps the best way to invest. Especially when you invest through a Systematic Investment Plan.
This will give you a great sense of safety and you will benefit from the magic of compound interest. The trick is to be consistent and invest through a trustworthy app like Cube Wealth.
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Ans. Yes, you can invest in mutual funds without professional guidance, but consulting with a financial advisor can provide valuable insights and help you make informed decisions.
Ans. Yes, mutual funds can play a crucial role in diversifying your investment portfolio and managing risk effectively when chosen in accordance with your investment strategy and risk tolerance.
Ans. Risk mitigation can be achieved through diversifying your investment portfolio, gaining a comprehensive understanding of the risks linked to various fund categories, and adopting a long-term investment approach.
Ans. No, the safety of mutual funds can differ significantly. Equity funds may exhibit higher risk compared to debt funds. It is crucial to select funds that are in harmony with your risk tolerance and financial objectives.
Mutual funds are generally considered safe investment options, offering diversification, professional management, and regulatory oversight. However, like any investment, they are not entirely risk-free. The level of safety depends on the type of mutual fund and your individual financial goals and risk tolerance. It's essential to conduct thorough research, understand the risks, and consult with a financial advisor when making investment decisions. Mutual funds can be a valuable addition to your investment portfolio when used prudently and aligned with your financial objectives. You can consult a Cube Wealth coach or download the Cube Wealth App.
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