Are mutual funds ill-equipped in managing risk?

In an interview to the Mint, two people in the know have divulged that “The market regulator wrote to the fund house earlier this month probing whether there was a violation of model code of conduct by the fund house, when it sold the highly rated paper at a loss.”

And, “In the letter, the market regulator has sought details of the transaction, the rationale of the sale and whether there was any other information that prompted the sale.”

If you thought investing in debt funds are relatively risk-free, your perception could change after reading these stories.

Selecting a right mutual fund for your portfolio is a skill. Look beyond the mutual fund schemes that have performed well in the recent past. Perhaps, a few of them might give you nasty surprises by selling “AAA” bonds at a huge discount soon after investing in them.

 

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