It’s common to hear the disclaimer ‘mutual funds are subject to market risks’ after every advertisement or explanation about mutual funds. So are mutual funds risky? Why is everyone still investing in them?
The disclaimer refers to ‘market risk’ – which is the risk that the unit price or NAV (net asset value) of the mutual fund units might fluctuate in the short term because they are ‘marked to market’ on a daily basis. However, investors do face other risks such as inflation risk which means the value of their savings will erode due to inflation. Investors also risk not being able to meet their life goals.
Here is a short video with the same answer – https://youtu.be/KrbTioCX8gU