Company (AMC) managing the Mutual fund?
When it comes to safety of investment, investors are mostly concerned about 2 things
- Capital protection
- Fraud protection
This can be ensured by choosing investment which suits you, so as to save you from unnecessary losses. Conservative investors should focus on hybrid funds or debt funds and avoid investing in small and mid-cap funds where volatility is quite high.Fraud protection:
It’s a no less than a nightmare if someone runs away with your hard-earned money. This may make you wonder how safe it is to invest in Mutual funds. To safeguard investor interests, Mutual funds are regulated by the Securities and Exchange Commission of Pakistan (SECP). All Asset Management Companies (AMCs) and Investment Advisories (IAs) are licensed by SECP to launch Mutual Funds and perform Investment Advisory Services. AMCs are required to follow due diligence before taking investor’s money. AMCs cannot simply shut down and get away with your money which makes Mutual fund just as safe as banks.
Many investors are also skeptical about investing via distributors. Kindly be rest assured that even if tomorrow the distributor’s or agent’s company is closed, you can always reach the AMC of the Mutual fund and redeem your units.Different types of risk associated to mutual funds:
- Market risk
- Liquidity risk
- Credit risk
- Interest rate risk