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Risky business - determining risk and suitability for mutual fund investments
What is risk and how do we define it?
Many investors would presume that risk means the permanent loss of capital. This is true, of course. If you invested in a dot com stock that bombed several years ago you could have easily lost your entire investment.
Short of outright fraud, it is unlikely that anyone can lose all of their money investing in a equity mutual fund. This is not too difficult to understand as mutual funds usually have dozens of stocks in their portfolios. To lose all of your money, each of those stocks would have to go bankrupt.
