Are Mutual Fund Investments Subject To Market Risk?

This article discusses the disclaimer ‘Mutual fund investments are subject to market risk; please read the offer document carefully before investing. We are sure you must have read that or heard it in every advertisement of the mutual fund. So let us learn everything about what it means.

- Luv Kumar

Why Are Mutual Funds Subject to Market risk?

Mutual funds, like other assets, are exposed to market or systemic risk. Because there is no way to foresee what will happen or if the value of a specific asset will rise or decline, and as the market is not predictable, there is no risk-free investing. The future is uncertain for all investments; no investment is risk-free.

No investment is risk-free. Though Mutual funds offer a broader diversification and value for money to an individual, a few risks are associated with mutual fund investment. Every investment is subject to market risk. We say this because no one can predict the future. For example, no one can judge when the value of the given asset will increase or decrease. Like all securities, mutual fund investments are also subject to market risk because the market cannot be accurately predicted or wholly controlled. What is a Market Risk?