Are mutual funds really risky? Expert busts the biggest myth around MF investing

Mutual funds are often wrongly clubbed with direct stock investing, but that comparison misses their biggest advantage: diversification. In a sharp rebuttal to the common perception that mutual funds are inherently risky, Jainam PMS CIO Ankit Tikmani said the product can, in fact, be “one of the less riskier asset compared to equities” when used appropriately and matched to an investor’s goals.
 

Breaking the biggest retail myth
Tikmani’s central argument is simple: mutual funds should not be viewed as a synonym for stock market speculation. Unlike a retail investor who may be able to track only a handful of companies, a fund manager operates with a wider research setup and can spread exposure across a much broader portfolio.

“It becomes very difficult for a retail investor to have that kind of diversified portfolio. At max, they can invest in three or four companies,” he said. That diversification, along with professional decisions on entry and exit, makes mutual funds a more efficient route than direct equity investing for many households.

Risk depends on purpose, not product label
The more important question, Tikmani suggested, is not whether mutual funds are risky, but which kind of mutual fund fits a specific financial need. That distinction is crucial in a market where many first-time investors still compare mutual funds with guaranteed-return avenues such as PPF, NPS or government-backed savings products.

His framework is goal-based. Retirement planning, children’s education, buying a house or building an emergency corpus each require different levels of liquidity and risk tolerance. In that sense, mutual funds are not a single asset class but a basket of options spanning equity, debt and hybrid strategies.
 

Why debt funds matter
Tikmani illustrated the point with a festive-season business example. If a trader needs working capital within two months to build inventory ahead of Diwali, equity exposure would be inappropriate because the money is needed in the near term and market volatility could disrupt capital availability.

“He or she should not invest in equity because he’ll be needing the funds two months down the line. So for them, debt will come into play,” he said. The takeaway is significant: risk in mutual funds can be moderated by choosing the right category, especially for short-duration goals.
 

A life-stage approach to investing
The broader message from Tikmani is that mutual fund investing should be aligned with where an individual stands in life, income stability and financial obligations. Younger investors with longer horizons may absorb more equity risk, while retirees or business owners with concentrated exposure elsewhere may be better served by debt-oriented products.

That makes mutual funds less about chasing returns and more about portfolio design. As Tikmani put it, mutual funds are “much more simpler and efficient compared to equities” — provided investors stop treating them as a one-size-fits-all bet on stocks.