When it comes to mutual funds, most people are afraid to try them, even because of the warning that we have become accustomed to hearing, after each announcement. ‚Mutual funds are subject to market risks. Please read the offer document carefully before investing.‘ But simply decide not to invest without even understanding what those risks are a little ridiculous.

While all investments have to share the risks, you can not get a good return for your hard earned money without taking big risks. Therefore, it is very important when you consider the investment fund.

The most important relationship to understand the relation of mutual funds is the risk-return-off. This can be very simple to explain – to a greater risk, the greater the gain or loss and therefore reduces the risk of low-income or loss.

There are many different risks, and mutual funds, investors should be aware of before investing. These include market, credit, inflation risk, interest rate risk, government/political risk and liquidity risk.

There may be a number of external influences that affect the overall market, which may cause prices and bond yields up and down. This can happen in the case of large enterprises and small and medium enterprises. This is known as market risk. However, a systematic investment plan that works on the concept of calculating the average cost rupee can help mitigate market risks.

Credit risk management which deals with investors in the debt through cash flows of the company. Credit risk is measured by independent rating agencies that the companies and their rate card. Rating of ‚AAA‘ is considered the safest and D is considered bad credit. This risk can be reduced well-diversified portfolio.

Inflation risk is the most common risk existing in the market today. Inflation is simply the buying power of the time. Most investors thinking investment decisions to protect the long-term capital. However, most of these investors end up with the amount of money buys less than it could be a pilot investment. This is because the inflation rate can grow faster than the rate of return. However, the well-diversified portfolio that invests in stocks may reduce the risk of inflation.

Liquidity risk is the risk that arises when it becomes difficult to sell securities, one has already been purchased. Can be mitigated in part to the diversification and also a great risk that the market is likely to buy silver.

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