Subbu's Solution

What are the risks involved in mutual fund investment?

Risk of investing in any instrument can broadly be categorised into two:
Permanent loss of capital- example investing in a company that goes bust.
Volatility in the price of the investment that you hold, Eg. It could be the price of the share that you hold or the unit value of the units of the mutual fund that you hold.
Both the above risks are reduced in the case of a mutual fund- since the investment is diversified across a number of stocks in an equity mutual fund or across a range of fixed income instruments- in the case of liquid or debt fund.
To summarize, mutual fund investment can be volatile depending on market conditions, but the risk is lower compared to holding direct equity or holding a bond.
Sometimes an asset class can be more volatile than it normally is. In such cases you can reduce the risk by investing in multiple asset class such as equity mutual fund, debt mutual fund or gold fund. Or you can straightway invest in a multi asset fund such as Quantum Multi Asset Fund, which reduces the risk of having a high exposure to one asset class and gives your investment portfolio the much needed diversification.
To get a general idea of risk involved in a particular mutual fund product you could refer the Product Label of that scheme. Mutual fund regulator SEBI has introduced ‘Riskometer’ that shows the level of risk associated with that particular scheme.


Subbu's Solution is authored by I. V. Subramaniam. I. V. Subramaniam is a director of Quantum Asset Management Company Private Limited. The responses expressed here are strictly for information and explanation purpose only. The responses are meant for general reading purpose and not to be considered as an investment advice / recommendation. The responses are not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or units of the Mutual Fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in the responses.

Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Please visit - to read Scheme Specific Risk Factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the scheme's objective will be achieved and the NAV of the scheme(s) may go up or down depending upon the factors and forces affecting securities markets. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC/ Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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