The dangers of making mutual fund investments in Singapore

Each year, many individuals in Singapore decide to invest in mutual funds. While this can be a wise investment choice, there are several dangers that investors should be aware of before making this type of investment. This article will discuss some of the risks associated with mutual fund investments in Singapore and provide tips on minimising these risks. This information will help you make informed decisions about your financial future. Thank you for reading.


Investment risk

The most significant risk associated with mutual fund investments in Singapore is losing some or all of your money. It is because mutual funds are not insured, and the value of mutual fund units can go up and down. Additionally, mutual funds tend to have high management fees, which can reduce the returns on your investments. Therefore, it is essential to conduct research and understand the mutual funds you are considering investing in before making a commitment.


Market risk

Another risk associated with mutual funds in Singapore is market risk, which is the risk that your mutual fund will suffer losses due to market volatility. The value of mutual funds can be affected by various factors, such as economic cycles and current events. It is crucial to understand the markets in which your mutual funds are invested and how they might react to changes in the economy or political climate.


Additionally, market risk is compounded by mutual funds being actively managed. It means that although mutual funds can be an excellent way to diversify your investments, your mutual fund manager may make bad investment decisions, which could result in losses for you.


Liquidity risk

Another risk associated with mutual fund investments in Singapore is liquidity risk. It refers to the possibility that you may need more time to quickly convert your mutual fund units into cash in times of need. Mutual funds are generally considered illiquid investments, meaning they can take a long time to convert back into cash. As such, it is important to only invest in mutual funds if you are sure you will not need to access the funds quickly.


Regulatory risk

There is also the possibility that regulatory changes could adversely impact your mutual fund investments in Singapore. Since mutual funds are regulated by the Monetary Authority of Singapore (MAS), they are subject to changes in MAS regulations and supervision from time to time. Before making any investments, it is crucial to ensure that you understand the MAS regulations that apply to mutual funds.


Currency risk

Mutual funds in Singapore are also subject to currency risk. It is the risk that exchange rate changes could affect your investments’ value. For example, if you invest in mutual funds denominated in US Dollars and the Singapore Dollar appreciates against the US Dollar, this could reduce your returns on investment. It is, therefore, essential to be aware of currency risks before investing in foreign currency-denominated mutual funds.


Manager risk

Finally, there is also the possibility that the mutual fund manager may perform better than expected. Mutual funds are actively managed, which means that the fund’s performance will depend to some extent on the skill and experience of the manager. As such, it is crucial to select a reputable manager with a track record of producing good returns for investors.


Tips to minimise risk

Finally, there are several tips that you can follow to help minimise the risks associated with mutual fund investments in Singapore. Firstly, it is crucial only to invest an amount of money you are comfortable losing should your investment perform differently than expected. Additionally, research is critical – ensure you understand the different types of mutual funds and the markets they are invested in before committing your money.


Another critical step to take is to diversify your investments. Investing in many mutual funds can spread the risk across different markets and asset classes. It is essential to review your investments regularly and make sure that they are still aligned with your financial goals.


Finally, it is also essential to diversify your investments and put only some of your eggs in one basket. It will help to reduce the overall risk of loss should one investment perform poorly.



Mutual fund investments in Singapore can be an excellent way to diversify your portfolio and generate returns. However, it is vital to understand the risks associated with these investments before committing any money. 


By following the tips outlined above and taking the time to research different options, you should minimise your risk and make informed decisions when investing in mutual funds. With the right approach, mutual fund investments can be a great way to invest and achieve your financial goals.