How to beat basic mutual fund risks

All the mutual funds carry some basic types of risks, but this does not mean that investors should avoid investing. The basic risks that every investor faces in the world of investment are volatility, uncertain and credit risk.

In the past six months, each and every investor has witnessed the volatility and even borne some losses. But to beat the volatility, investors need to invest for the longer term. And avoid shorter run return expectations. By extending the investment tenure, investors can avoid the short term volatility risks as well. Even the SIP way would be good in the market volatility phase as it will help them average the cost.

The second risk investors face while investing in the mutual funds is the credit risk, that is when the underlying investments in the debt funds fail to repay their interest and principal amounts and their credit ratings are downgraded. So for this, investors should always check the credit rating allotted to the instruments and should keep a keen eye on the portfolio of the fund.

The usual risk and key risk involved in the mutual fund investment is the uncertainty because no one can predict the market and the future of the stocks. So investors should always practice asset allocation strategies and should rebalance the equity and debt portion of their investment as per their risk appetite.