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Risks of Investing in Mutual Funds: What Every Investor Should Know
Thu, 24 Jul 2025
3 mins
Mutual funds are a popular investment option offering diversification and long-term returns. However, like all investments, they come with their own set of risks — such as liquidity risk, market volatility, interest rate fluctuations, and even political or economic instability. Let's explore these risks in detail so you can make informed decisions.
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Economic Risk
A slowdown in economic growth or macro-economic imbalances such as the increase in the central and state level fiscal deficits may adversely affect investments in the country. The underlying growth in the economy is expected to have a direct impact on the volume of new investments in the country.
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Market Risk
• The value of your mutual fund investment can fluctuate due to changes in the stock or bond market.
• A market downturn can lead to a decline in your investment's value.
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