Publicity of mutual funds (MF) comes with a warning – ‘MF investments are subject to market risks. Please read offer documents carefully before investing’. While equity mutual funds invest in equities and have direct exposure to stock market volatility, debt mutual funds are considered less risky due to their little exposure to direct equities, although they are exposed to risks associated with trading of debt instruments.
However, in this debt category, which is perceived as less risky, there is a category of mutual funds with the word ‘risk’ in the name itself – Credit-Risk Funds – which may scare the investors more. “When a normal person hears this name, he/she considers it as a most risky fund. Therefore this name “Credit Risk”, I feel, is a misappropriate name given by the Mutual Fund Industry,” said Financial Coach and Corporate Trainer Prof. Rahul Ranjan.
