Is investing in mutual funds risky? What is investment risk?

06. 01. 2021

The term »investment risk« represents the risk of the investor that during the time of saving they create a different return on the selected investment than expected, where the return may also be negative (i.e. that the investor creates a loss of capital).

Is investing in mutual funds risky? What is investment risk?

  • Individual funds differ from each other by the level of investment risk.
  • Equity funds are generally (mainly short-term); riskier than bond funds, and funds investing in less developed high-growth markets (e.g. China) are riskier than funds investing in highly developed capital markets in the European Union and / or North America.
  • Extending the maturity of savings greatly reduces the probability of loss on investments in equity funds.
  • Short-term stock market fluctuations are an everyday phenomenon and are not important in the long run, so we should not pay too much attention to them.
  • A reasonable investor never decides to invest in individual funds solely on the basis of past returns, nor does he respond to short-term fluctuations in capital markets.
  • An investor who assumes a reasonable investment risk can maintain the necessary calm while saving.
  • Higher returns can only be achieved by assuming greater investment risk.