Investing in mutual funds is one of the most popular ways to build wealth over the long term. However, like any investment, mutual funds come with their share of risks. It is essential to understand and assess these risks to make informed investment decisions. This article aims to shed light on some of the key risk assessment tools for mutual funds - standard deviation, semi-deviation, value at risk, average drawdown, and maximum drawdown. The calculated values of all these risk parameters are available on the website.

Small cap mutual funds, as defined by SEBI and AMFI, primarily invest in companies ranked 251st onwards in terms of market capitalization. They offer high growth potential as they invest in smaller, growing companies that could yield high returns. Moreover, they can uncover undervalued stocks that are often under-researched. Small-cap funds also bounce back quickly from economic downturns due to their adaptability. However, they have drawbacks like high volatility, and liquidity risk, and require a longer investment horizon. Although they carry significant risk, with informed decision-making, a clear understanding of the risk-reward paradigm, and guidance from skilled fund managers, they can contribute significantly to wealth creation.
 

1. Money market mutual funds invest in short-term, high-quality debt instruments, aiming to maintain a stable value.
2. Advantages include safety and stability due to high-credit-rating investments, high liquidity with typically penalty-free withdrawals, diversification across various debt instruments, and modest interest earnings.
3. Disadvantages encompass lower returns compared to riskier investments, lack of government insurance, vulnerability to inflation risk, management fees that can eat into returns, and the potential for negative yields in periods of extremely low or negative interest rates.