How Safe Is Our Mutual Fund Investments?

Mutual Fund Investments

It seems like asking – How safe is to drive a car?

That depends on you. It’s great to ride a car but first you need to either learn to drive or hire a driver. If you do neither, it is not safe to drive. Mutual fund investments, when we talk about, are one of the most popular investment vehicles around the world as it offers a wide range of innovative products to the investors. Though it is considered that investing in mutual funds is a safe way of investing for return, but the fact is none of the mutual funds are safe though all mutual funds are safe. Well how safe or unsafe our mutual funds are depends on how we invest in them. Consider electrical equipment like a geyser, if you handle it carefully by adjusting its temperatures, you will be on a safer side. But if you fail to abide by its usage instructions you might be at risk and harm yourself. So is the geyser safe or unsafe? The answer is both.

When you get to correlate the above example with mutual funds, it conveys that all mutual funds are safe if you know what, where and why you are investing in mutual funds. When an investor put his money into something his primary objective is to make positive returns through the investment. If you are new in the mutual fund investing, then the foremost thing you need to do is understand and educate yourself about the different mutual fund schemes that are available. After knowing it all, choose the scheme which is suitable to you for different time frames because every investment needs to be planned wisely.

SEBI’s initiative for investor awareness through mutual fund product labeling-

SEBI has come up with guidelines on mutual fund product labeling under which all mutual fund schemes will have color coding i.e. blue, yellow and brown. These will disclose information about the category of investment and help investors understand how safe or risk prone his investment would be. There will be more transparency in the risk associated with different mutual fund schemes. Also the brokers who misguide the investors while investing in beneficial schemes would be minimized. Therefore education and awareness can prove to be fruitful and productive while investing in a mutual fund scheme.

Mutual fund investment- a safe decision or not?

Mutual fund investments are great for easy and convenient money management for any period of time whether a week or 50 years. It is said that “Mutual fund investments are subject to market risk. Please read the offer document carefully before investing.” So it is up to you to choose your scheme wisely before making investment and be on a safer side.

Next time you plan to invest be sure about what amount, which fund and for how long keeping in mind the market buzz and the related economic factors.