When investing company money in mutual funds, most corporates take a step back and start thinking. Their uneasiness is understandable as mutual funds are market-linked products, and their returns aren’t guaranteed.
Since the ticket size of investment is often large, the question about the safety of investment is bound to crop up. So, are mutual funds a safe option for corporates? Let’s find out.
- A Well-regulated Industry
The Indian mutual fund industry is among the most well-regulated industries. The Securities and Exchange Board of India (SEBI) formulated the industry’s policies. SEBI’s policies are directed towards protecting the interest of investors, and time and again, the watchdog has come up with policies in favour of investors.
All mutual fund houses must strictly act as per the rules of SEBI, and if they fail to comply, they face the regulator’s wrath. Being under SEBI’s purview ensures your money is in safe hands. Also, SEBI has issued certain guidelines for investors to ensure their safety.
- Offers Complete Transparency
Mutual funds investments are pretty transparent. When you invest in a fund, you can see the sectors in which your money is being invested and their subsequent allocation.
Also, all mutual fund houses release a monthly factsheet that provides general information about the fund, its objectives, minimum investment amount, and assets under management (AUM) data.
The factsheet also has a section that gives you a broad idea of how a fund may perform in the future. Through this section, you can learn about the fund’s performance across time frames and compare it against its benchmark. You also know the expense ratio or the charge you pay to the fund house to manage your investments.
- Riskometer Helps Gauge Risk
Investment sage Warren Buffet famously remarked, “Risk comes from not knowing what you are doing.” However, the case is different for mutual funds. Every fund has a riskometer that tells the potential risk associated with the fund. While earlier, the riskometer highlighted category risk and not of the fund, post SEBI’s diktat in 2021, each fund now has a riskometer highlighting the risk of a particular fund.
In its new avatar, the riskometer provides an easy-to-understand way to assess the risk associated with a particular fund.
Also, fund houses must communicate to investors if the fund’s underlying risk has changed. So, at every step, you are aware of the risk associated.
Summing it Up
As evident, mutual funds are a safe option for corporations to park their funds and grow wealth. Depending on your corporate goals, you can choose the funds you wish to invest and remain invested until your investment objectives are fulfilled.
Prudent business money investment in mutual funds can not only help grow wealth but also ensure you build a corpus for your business goals in a disciplined and sustained manner.
Disclaimer: Mutual fund investments are subject to market risks, please read all scheme-related documents carefully
The content of this blog is not intended to serve any professional advice or guidance and Shootih takes no responsibility or liability in whatsoever manner for any investment decisions made by the readers of this blog or other blogs. Readers should seek independent professional advice before making any investment decision based on the information provided on this website.
