It’s impossible to compare funds “across the board”. Mutual funds not only differ in their financial objectives but also invest in different kind of securities that reflect the ultimate objective of the fund. Thus, depending on the securities the fund is investing in, or the mix of securities chosen for a specific fund, the element of ‘risk’ varies substantially.
The fund’s objective is what the fund seeks to achieve by investing. This will determine what kind of securities the fund will buy, and in what economic sectors or countries.
For example, a fund seeking the highest possible return on capital may invest in more speculative common stocks than one seeking maximum income from dividends. The risk in the first objective is much higher than in the second.
You can see, therefore, that the amount of risk involved is directly related to the fund’s objective. Generally speaking, it can be assumed that the higher the return, the higher the risk involved.
However, mutual funds remove much of the risk from investing because they are professionally managed by fund managers with many years experience in portfolio management. For example, in common stock funds, professional managers select the investments and monitor them carefully and
constantly. In addition, because of the ‘pooled’ concept inherent in funds, the element of risk is spread, thereby making funds less vulnerable to market fluctuations.
It should also be remembered that while it may be considered ‘safe’ to keep one’s savings in cash, there is always the risk that inflation will, over time, erode the value of those savings