Understanding risks for your investment
Risk is a part and parcel of all investments. For Mutual Funds, risks can be minimized through careful investment and good ear for market movements.
The risks that an investor need to be aware of while investing in Mutual Funds include,
Market risks: Here prices and yields are influenced by outside forces and influences like government legislation, war, economic depression etc.
Inflation risks: Inflation is the loss of purchasing power and if the rate of inflation is higher, then you risk purchase less for your money.
Credit Risk: This implies the stability of the company or the investor. If the investor is a credit risk, then you may not be getting the returns that you have promised to.
Interest rate risk: Interest rates movement in Indian Debt Market can be volatile. The price of securities in the money market can affect your NAV continuously.
Other risks include:
Changes in the government policy