MARKET RISK

IN CASE OF MUTUAL FUNDS

WHAT IS
MARKET RISK
Possibility that an individual or an entity will experience
losses due to factors that affect the overall
performance of investments in the financial markets.

Market risk, or systematic risk, affects the performance of the entire market based on the
exposure to underlying assets.

Market risk is the risk inherent in all types of investments that results from the fickle nature of
the market and of the global economy
WHY MUTUAL FUNDS ARE SUBJECT
TO MARKET RISK?

Mutual funds invest in financial markets, where prices of assets such as

stocks and bonds can rise and fall daily

The NAVs of the schemes may go up or down depending upon the factors
and forces affecting the securities market including the fluctuations in the
interest rates
 UNDERLYING SECURITY/INSTRUMENT

An underlying security is a stock or bond on which derivative instruments, Mutual Funds,

ETFs, are based

An underlying security can be any asset, index, financial instrument, or even another
derivative
 EXTERNAL FACTORS INVOLVED
Market conditions and economic outlook:
The prevailing market environment and macroeconomic factors are also things that determine how certain mutual funds
may perform under different conditions. Changes in interest rates and inflation can impact the performance of different
types of mutual funds, leading investors to adjust their choices accordingly.

Geopolitical Events: Events such as wars, political instability, trade disputes, and sanctions can disrupt global financial
markets and impact the performance of mutual funds, especially those with international exposure.

Regulatory Changes: Changes in government regulations and tax policies can affect the mutual fund industry. Regulatory
shifts can impact fund expenses, distribution, and investment strategies

Natural Disasters: Natural disasters and extreme weather events can disrupt supply chains, impact corporate earnings, and
affect the value of certain investments held by mutual funds
 MITIGATING MARKET RISK
Liquidity allows investors to react promptly to changing market conditions. If market risk
increases, you can quickly sell liquid assets to reduce exposure to potential losses. Investing
in ETFs or Diversification in terms of underlying assets can help manage the Market risk

Open-end mutual funds are highly transferable. Investors can easily buy or sell shares
directly from the mutual fund company at the current NAV price