Are mutual funds safe? Are returns on mutual funds guaranteed by Government of India, or Reserve Bank or any other government body?
Any mutual fund is as safe or unsafe as the assets that it invests in. There are two basic categories of mutual funds with others being variations or mixtures of these. Firstly, there are those that invest purely in equity shares (called equity funds or ” growth funds”) and secondly, there are those that invest purely in bonds, debentures and other interest bearing instruments called “income” or “debt” funds. The NAV of growth funds fluctuates in line with the fluctuation of the shares held by them. On the other hand, prices of debt instruments fluctuate to a much lesser degree and an income fund is extremely unlikely to face erosion in value. Most mutual funds have qualified and experienced personnel, who understand the risks of investing. But, nobody is immune from making mistakes. However, funds diversify the investment portfolio substantially so that default in any single investment (in the case of an income fund) will not affect the overall performance of a fund in a significant m
Any mutual fund is as safe or unsafe as the assets that it invests in. There are two basic categories of mutual funds with others being variations or mixtures of these. Firstly, there are those that invest purely in equity shares (called equity funds or ” growth funds”) and secondly, there are those that invest purely in bonds, debentures and other interest bearing instruments called “income” or “debt” funds. The NAV of growth funds fluctuates in line with the fluctuation of the shares held by them. They can also witness face substantial erosion in value, which could be permanent in some cases. On the other hand, prices of debt instruments fluctuate to a much lesser degree and an income fund is extremely unlikely to face erosion in value especially of the permanent kind. Most mutual funds have qualified and experienced personnel, who understand the risks of investing. But, nobody is immune from making mistakes. However, funds diversify the investment portfolio substantially so that def
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