“mutual Funds are Subject to Market Risk. Please Read the Offer Documents Carefully Before Investing”
You must have read this statement many a times in the TV commercials and also on the form that you must have filled and wondered what does this line mean. Let me tell you this line means. I do agree that the mutual funds are subject to market risk but that market risk if you go to consider is very minimal. Thanks to the stringent regulations employed by SEBI (Stock Exchange Board of India)..
Please note that mutual funds do not provide any guarantee of returns or capital (initial amount you invested).
Mutual funds are a good place to start because they offer you the opportunity to diversify quickly into a range of investments
Hence, nobody can assure you of returns, or even not suffering losses. Going strictly by the book, the possibility of a fund performing exceptionally poorly and all your savings dwindling to nothing is quite real.
Having said that, please remember that over the long term, the possibility of such an extreme event is quite negligible. If the historical performance is to go by, then there are hardly any diversified equity funds which have delivered negative returns over the last 10 years, if one would have invested through the SIP.
Therefore, there is no need to be overly concerned. Mutual funds are a very convenient vehicle for individual investors.
Moreover, returns tend to be commensurate with the kind of risk you take. Mutual fund schemes are riskier than the assured return schemes like fixed deposits and bonds. But, they also have the potential to generate far superior returns.
It is upon the investor to strike a balance between the return he wants to earn and the risk he wants to take. Having done that, he can invest in an appropriate combination of assured return schemes (National Savings Certificate, Public Provident Fund, post office schemes, bonds from institutions) and mutual funds.
Mutual Funds come under the regulation of the Securities and Exchange Board of India and have to meet stringent regulations. Therefore, they cannot just close shop and run away with investors’ money.
Mutual Funds comes under SEBI scanner and so does all the other public offering and there is a security deposit that they have to pay for getting listed. The chance of being fraudulent is negligible. With the growing number of people investing in mutual funds they are making it more reliable.
In fact, India happens to have quite stringent rules and norms regarding the setting up of an AMC and making periodic portfolio disclosures (stating where their have invested their money).
Moreover, in the set-up of a mutual fund, there is a body of trustees who are supposed to look after the interest of investors whose money is being managed under different schemes.
The mutual fund itself is a trust registered under the Indian Trust Act, and is initiated by a sponsor. The sponsor is the person who acts alone or with another corporate to establish a mutual fund. The sponsor then appoints an AMC to manage the investment, marketing, accounting and other functions pertaining to the fund.
Therefore, while it may be possible for a mutual fund to inflict losses to the investors as a result of poor fund management, they just can’t wind up their operations and run away with your money.
Mutual funds you can invest in
Kotak Mutual Fund
Franklin Templeton India Mutual Fund
Birla Sunlife Mutual Fund
Prudential ICICI Mutual Fund
HDFC Mutual Fund
TATA Mutual Fund
Sundaram Mutual Fund
Cholamandalam Mutual Fund
Standard Chartered Mutual Fund
DSP Mutual Fund
Principal Mutual Fund
SBI Mutual Fund
Reliance Mutual Fund
Deutsche Mutual Fund
ABN AMRO Mutual Fund
J M Financial Mutual Fund
ING Vysya
Optimix
HSBC Mutual fund
Fidelity AMC
For more information on Mutual Funds and Investments visit Kotak Mutual Fund
