No, Mutual Funds are not risky of you are investing for long term goals and have selected the right funds according to your risk, tenure and financial goals.
We will explain in details why they are not risky if you are investing for long term. Answer these two questions below and you will come to know whether they are risky or not.
1. Can Stock Market be 0?
No obviously, because practically that is not possible. For this to happen all 5000+ companies listed should go bankrupt and you do you think that is possible?
2. Have Stock Markets generated -ve returns for consistent 10 years?
No, you can check out the history of stock markets and they haven’t generated -ve returns even for 5 consistent years.
Reading the above questions you must have gotten some idea about it that money you are investing will not come to 0.
Now, Let’s talk if its not gonna be 0 then at least we should earn good returns compared to other products. There are basically 3 different types of mutual funds with different risks involved. As per the individuals needs and goals they can opt for the same.
If your goal is long term, consider investing in Equity Mutual Funds. Equity Mutual Funds invests your proceeds in Stock Markets and hence people are scared. I will give you some techniques to follow and you will not be scared with the volatility of the markets.
So you should do track your long term mutual fund investment on a daily basis, which can create a panic and fear in you if the markets are down. If you have invested in a government schemes, would you be able to check on regular basis?
-Pooja Patel, CFP CM