Are Mutual Funds Safe?

6 mins read

Are you unsure about investing in mutual funds? Are you still wondering if mutual funds are safe? Several factors have led to a general misunderstanding about investment funds, but are they all reasonable as an investment opportunity?

Mutual funds: are fears justified?

Traditionally, Indians have chosen investments that ensure the security of the capital and offer a secure return. This is an important reason why fixed deposits (FD) and revolving deposits (RD) are gaining popularity.

Additionally, you can invest in FDs and RDs at banks and post offices that are considered the safest places to invest. Mutual funds did not gain the same confidence as many AMCs are unknown to investors.

Mutual funds have also suffered, as many people believe they may lose money because returns are not guaranteed. In addition, they are accompanied by a warning that investment funds are under market risk.

It is for these reasons that investment funds are not considered as a safe investment option, as are bank time deposits. However, this is untrue, as mutual funds can give you an inflation-winning return if you understand the investment and invest as per your financial goals and risk profile.

Stuffing Factors To Consider The Safety Of The Taking Fund

Now the second biggest concern when investing in an investment fund – risk.

Yes, investing in mutual funds involves a certain element of risk, as their outcome is related to market movements. However, there are many factors that need to be considered, and these factors help to balance the risks associated with mutual funds.


When investing in a traditional zero-risk financial instrument that guarantees a guaranteed return, the return is limited. Depending on your age and fixed term, you will receive up to 7% return on your investment. However, mutual funds are designed to generate more capital. A well-managed investment fund has the potential to earn up to 12% capital gains. This is almost twice as much as that offered by traditional financial instruments such as fixed or periodic deposits. The purpose of an investment fund is to take advantage of the securities markets and earn as much as possible. In essence, it allows investors to plan for specific financial goals, including educating their children, planning a family vacation, buying a new home, planning retirement, and so on.

Factor Of Determination

A systematic investment plan (the most popular among investors) makes the investments of mutual funds much safer because it affects the uncertainty of life. What to do if there is a medical crisis in the family and the investor cannot afford to invest in this month’s SIP? In such a situation, the investor may suspend SIP and, if possible, reinvest. Is this possible with a recurring deposit? No. If you do not have money to invest in a recurring deposit for a certain month, your recurring deposit will be canceled.

No Need To Depend On The Loan

Assume that an investor has invested in an investment fund for ten years and has made a significant return on capital. But now, the investor wants to send his children abroad to study higher education. With an educational loan, the investor pays a high-interest rate to the bank (in some cases 12%). This is higher than the interest rate on a home loan. But what if the investor doesn’t have to choose a loan? All they have to do is leave the investment fund in which they have invested and use capital gains (potentially 12% or more) to fund their children’s education.

Tax Benefits

Compared to traditional financial investment instruments, investment funds offer better tax efficiency. Short-term as well as long-term profits from mutual funds are taxed so that you do not pay a significant portion of your income in tax. In addition, some mutual funds, such as an equity-linked savings scheme, are specifically designed to serve tax savings.

Are mutual funds safe?

There are two ways to make sure your investment is safe:

• Security in relation to the company or institution where you invest your money.
• Security for capital protection and fixed income.

However, before investing, you need to know the following:

Nobody’s running out of your money

If you are worried that mutual funds have some type of flight-night-night scheme, then you can be sure that mutual funds are completely safe. You will not wake up every morning to discover that the investment fund in which you have invested has disappeared with your money. It never happens! Why do we say that?

As investment fund companies are regulated and supervised by regulators such as the Indian Securities and Exchange Commission (SEBI) and the Indian Investment Fund Association (AMFI), no fund house can escape investor money.

The investment fund’s household license is issued after due diligence in the same way as banks obtain a banking license. A mutual fund house is very secure.

Mutual funds are designed to generate higher tax-efficient returns

Mutual funds do not provide capital protection or fixed income. However, this is a good thing because mutual funds would be a poor investment product if they did.

The goal of investing in such funds is to earn higher returns than traditional investment opportunities. These returns are due to broader market positions and the professional management of investment funds.

Investment funds are also more tax-efficient than traditional investments. Moreover, the two benefits of beating inflation and tax-efficient returns make investment funds an investment choice for experienced investors.

Both short-term and long-term profits from investment funds are taxed in a way that does not eat returns. These funds make sense as long-term investments because the longer you invest, the more you earn.

This is because of the ability to maximize benefits, which in turn brings in more revenue. Over time, investment funds have outperformed traditional investments and also outperformed inflation.

The risk associated with mutual fund investments can be managed by diversifying your investments and investing based on financial objectives, time horizon, and risk tolerance.

Should you invest in mutual funds

Mutual funds are safe if you recognize them. Investors shouldn’t have to worry about short-term fluctuations in returns when investing in equity funds. You should choose the right investment fund that is in sync with your investment goals and invest in the long term.

Before investing, it is advisable to research and read more about mutual funds. There are several types of investment funds that are suitable for different types of investors, such as aggressive, moderate, and conservative investors.