Mutual Funds do not provide assured returns. Their returns are linked to their performance. They invest in shares, debentures, bonds etc. All these investments involve an element of risk.

Some of the Risk to which Mutual Funds are exposed to is given below:

Market risk: If the overall stock or bond markets fall on account of overall economic factors, the value of stock or bond holdings in the fund’s portfolio can drop, thereby impacting the fund performance

Non-market risk: Bad news about an individual company can pull down its stock price, which can negatively affect fund holdings

Interest rate risk: Bond prices and interest rates move in opposite directions. When interest rates rise, bond prices fall and this decline in underlying securities affects the fund negatively.

Credit risk: Bonds are debt obligations. So when the funds invest in corporate bonds, they run the risk of the corporate defaulting on their interest and principal payment obligations.