| You must have read this statement many a | | | | risk he wants to take. Having done that, he |
| times in the TV commercials and also on the | | | | can invest in an appropriate combination of |
| form that you must have filled and wondered | | | | assured return schemes (National Savings |
| what does this line mean. Let me tell you | | | | Certificate, Public Provident Fund, post |
| this line means. I do agree that the mutual | | | | office schemes, bonds from institutions) and |
| funds are subject to market risk but that | | | | mutual funds. |
| market risk if you go to consider is very | | | | |
| minimal. Thanks to the stringent regulations | | | | Mutual Funds come under the regulation of the |
| employed by SEBI (Stock Exchange Board of | | | | Securities and Exchange Board of India and |
| India).. | | | | have to meet stringent regulations. |
| | | | Therefore, they cannot just close shop and |
| Please note that mutual funds do not provide | | | | run away with investors' money. |
| any guarantee of returns or capital (initial | | | | |
| amount you invested). | | | | Mutual Funds comes under SEBI scanner and so |
| | | | does all the other public offering and there |
| Mutual funds are a good place to start | | | | is a security deposit that they have to pay |
| because they offer you the opportunity to | | | | for getting listed. The chance of being |
| diversify quickly into a range of investments | | | | fraudulent is negligible. With the growing |
| | | | number of people investing in mutual funds |
| Hence, nobody can assure you of returns, or | | | | they are making it more reliable. |
| even not suffering losses. Going strictly by | | | | |
| the book, the possibility of a fund | | | | In fact, India happens to have quite |
| performing exceptionally poorly and all your | | | | stringent rules and norms regarding the |
| savings dwindling to nothing is quite real. | | | | setting up of an AMC and making periodic |
| | | | portfolio disclosures (stating where their |
| Having said that, please remember that over | | | | have invested their money). |
| the long term, the possibility of such an | | | | |
| extreme event is quite negligible. If the | | | | Moreover, in the set-up of a mutual fund, |
| historical performance is to go by, then | | | | there is a body of trustees who are supposed |
| there are hardly any diversified equity funds | | | | to look after the interest of investors whose |
| which have delivered negative returns over | | | | money is being managed under different |
| the last 10 years, if one would have invested | | | | schemes. |
| through the SIP. | | | | |
| | | | The mutual fund itself is a trust registered |
| Therefore, there is no need to be overly | | | | under the Indian Trust Act, and is initiated |
| concerned. Mutual funds are a very convenient | | | | by a sponsor. The sponsor is the person who |
| vehicle for individual investors. | | | | acts alone or with another corporate to |
| | | | establish a mutual fund. The sponsor then |
| Moreover, returns tend to be commensurate | | | | appoints an AMC to manage the investment, |
| with the kind of risk you take. Mutual fund | | | | marketing, accounting and other functions |
| schemes are riskier than the assured return | | | | pertaining to the fund. |
| schemes like fixed deposits and bonds. But, | | | | |
| they also have the potential to generate far | | | | Therefore, while it may be possible for a |
| superior returns. | | | | mutual fund to inflict losses to the |
| | | | investors as a result of poor fund |
| It is upon the investor to strike a balance | | | | management, they just can't wind up their |
| between the return he wants to earn and the | | | | operations and run away with your money. |