Unlike fixed savings, the returns on mutual fund investments are not fixed or guaranteed. How much you earn depends on how the underlying investments perform in the market.
Here’s how it works for different types of funds:
Conservative Portfolio (Money Market): They earn interest that accrues daily. However, the interest rate can change depending on market conditions, so your daily earnings may vary.
The buy and sell prices of these funds generally remain the same.
Balanced and Equity Portfolio (Non-Money Market): They earn returns mainly through capital appreciation. This means you make money when the value of your investment increases.
The value of your investment depends on the fund’s unit price:
- When the unit price increases, your investment gains value.
- When the unit price decreases, your investment loses value.
The takeaway? Your mutual fund returns depend on the type of fund you invest in and how it performs in the market. While you can earn returns, they are not guaranteed.