InvestorQ : As per the ads on TV, Do all mutual funds give rewards?
Akansha Shivdasani made post

As per the ads on TV, Do all mutual funds give rewards?

Aastha Awasthi answered.
3 years ago
Well, to be honest, no investment is ever all rewarding, almost all of the investments have risk associated with it, some might have high risk, while others may have nominal risk. So, mutual funds are no different.
It is true that mutual funds are considered to have the best returns if chosen wisely, which in turn minimizes the risk involved. But that does not mean that there is no risk at all, there is less risk, but the risk still persists. What risk is associated with mutual funds, depends totally upon its underlying assets?

Let me explain with an example:
If one opts for bond funds, it has risk associated with interest rates, call and credit risks. Interest rate risk relates to the possibility that the bond declines in value if interest rates rise. Call risk, on the other hand, relates to the possibility that the bonds may be redeemed before time, due to the decline in interest rates.

Credit risk if I say is the possibility of default in one's obligation to pay investors. All of these risks at the end would be an ultimate loss for the investor. Hence, even though mutual funds are highly beneficial for an investor, there may be some possibility of loss, which should always be considered and kept in mind before making any investment. Not all glitter is gold.