Every investment we make entails some level of risk, although the risk's nature and severity vary. The same holds true for mutual funds.
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When it comes to returns on investing, not all Mutual Fund programmes are equally risky.
Equity plans have the capacity to provide higher long-term returns that can generate wealth. Always keep in mind that inflation is a problem and that the greatest asset class to combat it is shares. Therefore, it may be said that certain risks are worthwhile.
In contrast, compared to equity funds, the risk connected with liquid funds is significantly lower. A liquid fund prioritises capital protection by taking on less risk and producing returns that are commensurate with the level of risk assumed.
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Additionally, it's essential to keep in mind that there are other risks to take into account besides those posed by returns. Other hazards exist, such as the chance of running out of money. The ease with which you may turn your investment into cash is measured by liquidity risk. Mutual Funds have the lowest level of risk.
Ultimately, the best way to understand the type and scope of risk is to properly understand and evaluate the scheme and to seek the advice of a distributor of mutual funds or an investment advisor.