It is often heard in mutual funds that, 'the higher the risk, the higher the return'. is this true?a
If 'risk' is measured as the probability of loss of capital or volatility and volatility in investment value, asset classes such as equities are undoubtedly the most risky and funds held in savings accounts or government bonds are undoubtedly the least risky. it happens.
Liquid funds are the least risky and equity funds are the most risky in the mutual fund world.
Therefore, the only reason to invest in equities would be the expectation of higher returns. However, higher returns come to those who invest in equities with patience, after careful study over a long period of time. In fact, risk in equities can be reduced by adopting diversification as well as by adopting longer time horizon.
Each category of mutual fund schemes involves different types of risks such as credit risk, interest rate risk, liquidity risk, market/price risk, business risk, event risk, regulatory risk etc. These can be mitigated by the expertise and diversity of your investment advisor and fund manager.