Risk Factors
The categories of risk that apply to mutual funds, bonds, insurance and NPS.
1. General Risk Factors
- Market risk: Prices of securities held by a scheme can fall due to overall market movements, beyond the control of the fund manager.
- Liquidity risk: Some securities may be difficult to sell quickly without impacting their price, which can affect a scheme's ability to meet redemptions promptly.
- Concentration risk: Schemes focused on a single sector or theme carry higher risk than diversified schemes.
- Currency risk: International or global schemes are additionally exposed to currency fluctuation.
2. Equity Scheme Risk
Equity and equity-oriented schemes (including ELSS) invest in company shares, whose prices can be volatile in the short term. They are generally more suitable for goals at least 5–7 years away.
3. Debt Scheme Risk
Debt schemes carry interest-rate risk (bond prices fall when interest rates rise) and credit risk (the issuer of a bond held by the scheme may delay or default on payment). Not all debt schemes are equally safe — credit quality varies by scheme.
4. Fixed Income & Bond Risk
Corporate FDs, bonds and similar instruments carry issuer credit risk — the possibility that the issuer is unable to repay. Credit ratings can be downgraded after you invest. These instruments are not covered by deposit insurance in the way certain bank deposits are.
5. Insurance-Linked Products
Unit-linked insurance plans (ULIPs) carry investment risk in the investment portfolio, which is borne by the policyholder. Traditional and term plans carry the risk of policy lapse if premiums are not paid on time, and of claim rejection if disclosures at the time of purchase were incomplete or inaccurate.
6. NPS Risk
Returns from the equity and corporate-debt components of NPS are market-linked and not guaranteed. A portion of the corpus must be used to purchase an annuity at exit, and annuity rates at that future date are not known in advance.
7. Portfolio Management Services (PMS)
PMS portfolios are managed by SEBI registered Portfolio Managers and are typically concentrated in fewer securities than a mutual fund, so they can be more volatile and may underperform the market or their benchmark for extended periods. The minimum investment is ₹50 lakh. Securities are held in your own name, but liquidity, exit loads, fixed and performance-linked fees, and taxation on each transaction in the portfolio apply as set out in the Portfolio Manager's Disclosure Document and client agreement. There is no assurance or guarantee of returns, and the value of the portfolio can fall below the amount invested. Please read the Disclosure Document carefully before investing.
8. Past Performance
Past performance of any scheme, fund manager or AMC is not indicative of, and does not guarantee, future results. Every investment decision should be made after reading the scheme's Statement of Additional Information (SAI) and Scheme Information Document (SID).