Why Should You Invest In Them If "mutual Funds Are Subject To Market Risks”?

Mutual funds are not the only investment option subject to market risks – interestingly, they are relatively safer as there are investment plans that give good returns despite market performance.

Let us say you go to a dentist following some annoying pain in your teeth. The dentist does the examination and identifies that your wisdom teeth have to come out. A very common procedure right? Many of us have gotten it done. There is a bunch of paperwork you will need to sign before the procedure though. Have you read them carefully and paid attention? One of the papers you would have signed will tell you that the dentist is not liable if you react negatively to the treatment and get an infection or perhaps even die from blood loss! Woah hold on one minute! Why are we talking about death for a simple procedure?

Forget the dentist. At least that example had something to do with health. You go to your kid?s school to give a permission slip allowing the school to take the children on an excursion. And suddenly, you are signing more papers, one of which requires that you agree that the school is not liable for the safety of the children during the trip!

This is an epidemic situation. At the gym, they are not responsible for the safety of your personal belongings and no one at the office is responsible for any work-related stress or injury you incur!

Does that mean that none of these people or entities do their job properly? Of course not! Every one of them, people or entities, do follow the principle of „due diligence?. They are going to do everything in their power to make sure you are healthy and that your children and your belongings are safe. The document you sign is more of a disclaimer that covers their legal backside, under the rare circumstance that something goes wrong.

The disclaimer made by mutual funds is along similar lines. The managers of the funds and their team of industry and investment experts are going to take due diligence and make everything in their power to make sure that the funds meet the objectives. The intention of the disclaimer is to simply inform and educate the investors of the likelihood of risk – which is not the same across all funds! There are funds of differing levels of risk – from high-risk to almost no-risk funds.

What?s more – the mutual fund industry is one of the most transparent industries – funds publish details of their NAV, cost and turnover on a regular basis. There might be hidden costs in the bills charged by your doctor, but there are no hidden costs in this industry!

Just like the disclaimer does not stop you from going to the dentist, don?t let it stop you from investing. All that you have to do is  choose a fund that matches your risk palate!