Investing in mutual funds can be a great way to grow and diversify your portfolio, but it’s essential to understand the risks involved. At Dhanvantree, we prioritize to keep you fully informed. Please read the following disclosures carefully:
Market Risk and Potential Loss of Capital
When investing in mutual funds, be aware of the following risks:
- Market Volatility: The value of your investment can fluctuate due to changes in the stock market. This means that the price of the securities within the mutual fund can go up or down, impacting your returns.
- Economic and Political Changes: Shifts in the economic environment (like inflation or interest rate changes) or political landscape (like new regulations or government instability) can influence market performance and your returns.
- Issuer Defaults: There is a risk that the companies or entities that issue the securities in your mutual fund may fail to meet their financial obligations, potentially leading to a loss of capital.
- Force Majeure Events: Events such as natural disasters, wars, or other geopolitical issues can negatively affect market conditions and, consequently, your investments.
- Bankruptcy or Insolvency: If an issuer of the securities within the mutual fund declares bankruptcy or becomes insolvent, the value of those securities may plummet, affecting your investment.
- Portfolio Segregation: In adverse conditions, the Asset Management Company (AMC) may segregate certain troubled assets from the main portfolio to protect investors, which could impact the liquidity and value of your investment.
Suspension of Redemption
If a mutual fund scheme faces a liquidity crisis, it may suspend the ability to redeem your investments. This means that during such periods, you might not be able to access your funds immediately. Liquidity crises can occur due to market stress, high volumes of redemption requests, or other unforeseen financial difficulties.
Risks with New Fund Offerings (NFO)
When investing in a New Fund Offering, please consider the following risks:
- Price Volatility: The initial prices of the securities in a new fund can be very volatile. This means they can experience significant ups and downs in a short period.
- Liquidity Issues: New funds may not have enough buyers and sellers, making it difficult to sell your investment when you want to.
- Delisting Risk: There is a possibility that the scheme could be delisted from the exchange, meaning it would no longer be available for trading, which can impact your ability to sell the investment.
Winding Up of Schemes
Mutual fund schemes might be wound up under certain conditions, such as:
- Illiquid Instruments: The fund holds investments that cannot be easily sold or converted to cash, making it difficult to meet redemption requests.
- High Redemption Requests: A large number of investors wanting to withdraw their money at the same time can strain the fund’s liquidity.
- Unforeseen Market Events: Sudden and significant market events like a financial crisis can force the closure of a fund to protect investors’ interests.
Our Commitment to You
At Dhanvantree, we are dedicated to helping you understand and manage these risks by providing:
- Detailed Information: We offer comprehensive details about each mutual fund scheme, including its specific risks, to help you make informed decisions.
- Regular Updates: We provide ongoing updates and insights into market conditions and the performance of your investments, so you are always well-informed.
If you have any questions or need further clarification about these risks, please reach out to our team. We are here to support you in making informed investment decisions.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.