Market Risks in Mutual Fund investment

Investment in Mutual Funds are Subject to Market risk .....This is the disclaimer written with each mutual fund communication to the public by SEBI (Securities and Exchange Board of India ) to make people cautious while investing through mutual funds schemes , But this is only the beginning or the basic to the Risk , The degree of Risk taken in produces returns on investments , Risk free rate is the rate of return delivered without any deviation , the risk is nothing but the deviation from the expected return from the investment , Risk / Reward ratio defines the relationship between the risk and the return , A person walking on his foot on the road on the footpath is less prone to risk of accident until some external events occurs to damage him in some way , But a Biker , riding the bike at 60+ Km/Hr speed is more prone to collapsing or getting hit by some vehicle , Here Safety Plays a important role , means if the biker has checked his bike's fitment before riding it like brakes , wheels , accelerator wire etc , and at the same time he has to ensure he is wearing all safety accessories like Helmet , Hand Gloves , Specs , boots , knee protector etc. Those Safety features will reduce the hazard a big way , that will mitigate the Risk of Accident in some way , let say you want to go on a holiday to Dubai , which Transport you will choose then , Obviously the Air Flight , reason being the only Transportation resource are available is Air Transport , You take 100% life risk to reach the Dubai and even you do not know the Flight pilot also in person , You just Believe the Carrier , the flight , the pilot that you will reach safely , You believe in the services of Flight company , reason being they are professional and experienced in their job role , like wise in Mutual fund or any other investment that Offers you return more than Risk Free return like Bank Fixed Deposit or Government Securities that their principal would be protected and return will be delivered that is promised by the Bank or Sovereign bodies , But The time you want more return higher to Risk free return then you take risk , reason being the extra return generated by the said investment over and above Risk free rate involves some kind of Risk , like Loss of principle , Safety of principle , There might be return gets generated in negative terms or positive terms , Here Asset management companies playing a very important role in managing the risk to increase the return , they take calculated risk to generate more returns , Higher the Risk , Higher the return , Lower the risk , Lower the Return , A professional Fund Management ensures the Safety, Liquidity  of the capital while generating returns , Risk are classified in a broad way , to name a few , Investment risk , Systematic risk , Business risk , Credit risk , default risk , Market risk , Reinvestment risk , company risk , management risk, Legal Risk and many more to name a few .

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