I have downloaded two apps namely Groww and ET Money to see the various Mutual Funds available in the market. The disclaimer reads that Mutual Funds are subject to market risks.

I am curious to know what is the worst thing that can happen to my invested amount. Say I invest a minimal Rs. 100 per month for a period of 3 years in SIP mode in any of those, in the worst case, would I lose all my amount?

Based on the last 5 years performance, a certain Mutual Fund provided say 15%. I have seen the graph sloping upwards. I understand future returns can't be precisely predicted based on past performance. And say, during the time I finished the 3 years, the graph sloped downwards, what are its results?


  • How much may I expect returns from Mutual Funds depending on the scenario of that graph?

  • What is the worst case scenario: no returns or return of the principal amount?

Edit: I am adding some screenshots to add clarity in this question.

Screenshot 1:


Let's call this point of time A. NAV at this point is 57.2075. This is the hypothetical point of time when I started investing on a monthly basis.

Screenshot 2:


Let's call this point of time B. NAV at this point is 46.16. This is the hypothetical point of time when my investment period gets over.

Between A and B, there are several instances where NAV is above the one at point A. Let's call these points C1, C2, C3,....and so on.

However, NAV at point B is lower than on point A. In such a case do my returns depend on all those points C1, C2, C3...where NAV were much higher? Or do returns solely depend on point B, where NAV was much lower than where I started i.e point A?

  • 17
    The worst thing that can happen is that you lose money. The best thing is that you make money. How much either of those will be cannot be known. Commented Jul 21, 2021 at 16:27
  • 8
    @SeverusSnape If you put $100 in, and the fund loses half its value, you've lost $50 of your principal. (Probably a little bit more from fees, too.) It's possible for your principal to go to zero, but index funds protect you quite a bit from that; for all the stocks in the fund to go to zero, you'd be looking at a global economic armageddon.
    – ceejayoz
    Commented Jul 21, 2021 at 17:27
  • 24
    The worst thing that can happen is that you discover the fund managers were fraudulent, and none of your money was invested in anything at all. See en.wikipedia.org/wiki/Bernie_Madoff for example.
    – alephzero
    Commented Jul 22, 2021 at 8:15
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    @alephzero Note that Bernie Madoff's company was not a mutual fund. He was a broker-dealer, managing money for individual investors. Mutual funds are much more heavily regulated, somewhat like the difference between privately-held and publically-traded corporation.
    – Barmar
    Commented Jul 22, 2021 at 14:12
  • 5
    @ceejayoz Indeed, if a major index lost all it's value I think losing your investments would be the least of your worries. Commented Jul 22, 2021 at 14:55

10 Answers 10


From a comment:

do I lose the principal amount too?

You misunderstand what investing means: when you buy stock shares (directly, or indirectly via a mutual fund) with your money, you buy those shares.

Meaning that, as far as "the market" is concerned, you have no principal left, only shares of stock.

If share prices go up, then bully for you: the value of your portfolio goes up. If share prices plummet (like in 2008 and March 2020) then sad for you: the value of your portfolio goes down.

Bottom line: brokerages are not banks.

  • 2
    And if the company you bought shares in is liquidated, you get nada.
    – Dale M
    Commented Jul 23, 2021 at 13:48
  • @DaleM "And if the company you bought shares in is liquidated, you get nada" — How is that possible, especially after the voluntary liquidation of a solvent company?
    – Flux
    Commented Jul 26, 2021 at 12:50
  • @Flux debts must be paid first.
    – RonJohn
    Commented Jul 26, 2021 at 13:01
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    @Flux a company has to be insolvent before it can be liquidated. Solvent companies can be wound up and deregistered but not liquidated.
    – Dale M
    Commented Jul 26, 2021 at 22:27

You Can't KNOW How Risky Your Investment Is

As others have pointed out, investing in a mutual fund entails the risk of losing your money, up to and including the full amount you have invested.

But how likely is losing everything?

You can ESTIMATE Your Risk

Fundamentally, when you buy a mutual fund, you are paying someone to buy stocks for you. Stocks are simply small slices of ownership in a company.

So you can estimate how trustworthy the mutual fund company is. Does your country have laws that regulate the sales of stocks and mutual funds? How strong are they? Are they enforced? Does the company value its reputation, so it is unlikely to cheat you somehow?

Then you can look at the risk of the companies the mutual fund is investing in. If the mutual fund buys, for example, large US companies or large Indian companies, you face the risk of an economic downturn in that specific country. You personally might evaluate the risk of a major downturn in those countries one way, and I might evaluate them another. There's no way to KNOW in advance. (and anyone who tells you there is a way to know is probably trying to scam you.)

Fall to Zero is Pretty Unlikely

For a mutual fund, one business collapsing is probably not a problem. The fund manager can sell shares when it starts to drop, and hopefully growth in the other companies offsets the (hopefully small) loss you took before the manager sold.

For the whole fund to fall to zero, all of the companies in the fund would have to fail suddenly enough that the fund manager can't offload them. The risk is non-zero, but pretty low.

Holding Delivers Better Results

Generally, over the last hundred and fifty or so years, the global economy has grown. It's often wise to "ride out" a downturn by leaving your investments in place, even if they have lost value. Eventually, it is likely that the economy will recover, and you can't gain the full benefits of the recovery if you pull out your investments during the recession.

(You would have to "time the market" by knowing exactly when it's dropped as much as it is going to, and invest again when this happens - this is generally considered impossible to do consistently.)

  • "The fund manager can sell shares when it starts to drop, and hopefully growth in the other companies offsets the (hopefully small) loss you took before the manager sold." You seem to be endorsing market timing here, yet rejecting it in the next section. Stop loss is a poor strategy that gives a false sense of security and encourages herd behavior. Commented Jul 26, 2021 at 17:09
  • @Acccumulation - It's not timing the market to say - "the risk of failure for this company has changed since I initially invested, I should change my position." That's prudent investment.
    – codeMonkey
    Commented Jul 26, 2021 at 17:18
  • If you think you know better than the market what the risk of failure is, that's market timing. Commented Jul 27, 2021 at 16:42

Several good answers here with a lot of useful detail and nuance, but none actually give you the simple, no bones about it answer. You ask:

What is the worst thing that can happen with my investment in mutual funds?

You can lose 100% of your investment. That would be your worst case scenerio.

  • This is an irrational response. Yes, it's possible, but so is getting hit by a comet. It is far more likely that you'll die in the car on the way to cash out your funds than the funds 'go to zero'.
    – FrozenKiwi
    Commented Jul 26, 2021 at 11:08
  • 1
    They didn’t ask for what was most likely to happen. They asked for the worst that could happen. That isn’t irrational, it’s the end of the scale.
    – GeekInOhio
    Commented Jul 27, 2021 at 23:44

The most common way to predict future results is to look at prior results for the same fund. Nothing is guaranteed or course, but there's no other way to accurately predict what could happen.

Prior results will give you a range of expected results and the probability of those results occuring again. Obviously, the longer the history the more accurate the prediction.

So look at the best, worst, and average 3-year returns for the fund over its lifetime. You can probably expect your results to be somewhere in that range.

In short, there's very little chance of you losing all of your money in an unlevered fund (since that would mean every stock in the fund went to zero), but short of that, the actual performance of the fund is uncertain - you can only talk in vague ranges and probabilities.

  • In theory, would I lose something from the principal amount too? Say, the graph sloped upwards and right before the period is over, it sloped down. For example: during the investment it was at 100, it soared high but right before I finished the period it went down to say 99. In that case do I lose all of the principal amount or just some of it? Commented Jul 21, 2021 at 16:32
  • Yes you can absolutely lose some of your principal - just not all of it. Depending on the risk (variance of returns) of the fund you might lose, say, 30% over 3 years in a worst-case scenario. but the average return might be 20% and the best case might be 100%.
    – D Stanley
    Commented Jul 21, 2021 at 16:38
  • There are investment vehicles that protect your principal by giving up some of the upside (e.g. if the fund gains 20% you only get 10%, but if the fund loses 10% you lose nothing), but they are typically only available to very large investors (meaning I don't know of a mutual fund or ETF that works that way).
    – D Stanley
    Commented Jul 21, 2021 at 16:39
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    There are a variety of structured annuities that provide a caps along with downside protection. A common type offers 7-10% gain to the upside (depends on the sector/ETF chosen) while indemnifying you for the first X percent of the downside (say 10%). These are generally based on a combination of option positions and if you do it yourself, you'll have a higher profit cap and/or larger amount of downside protection. Ironically, these two numbers get even higher (a good thing) when implied volatility increases. Commented Jul 21, 2021 at 17:37
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    Prior results really don't predict future returns. It is a common practice for someone wanting you to invest in a fund to first launch multiple funds, then stop marketing the ones that don't give good returns. If the return is completely random, the funds marketed will all have above-average past returns, despite there being no reason to think they are better than random.
    – Yakk
    Commented Jul 22, 2021 at 14:00

Probably the worst thing that can happen is that your mutual fund turns out to be part of a Ponzi scheme, or is otherwise fraudulent. See e.g. Bernie Madoff. But even there, investors have recovered about 80% of the money they put in: https://www.ai-cio.com/news/madoff-victims-recovery-tops-80-losses/

  • 1
    Then that's not the worst thing. You can totally lose 50% or more in an investment. With low probability, but far from impossible.
    – DonQuiKong
    Commented Jul 22, 2021 at 13:06
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    Bernie Madoff's company was not a mutual fund. While it's theoretically possible for a mutual fund to be fraudulent, it's very unlikely because of all the regulations.
    – Barmar
    Commented Jul 22, 2021 at 14:14
  • For instance, mutual funds are audited on a regular basis.
    – Barmar
    Commented Jul 22, 2021 at 14:15
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    @Barmar Just want to point out that this labelled India. You might want to qualify whether you are sure that's the case in India.
    – JimmyJames
    Commented Jul 22, 2021 at 19:44
  • @JimmyJames Didn't notice that. I have no idea if or how this stuff is regulated there.
    – Barmar
    Commented Jul 22, 2021 at 19:46

Gains and losses are "realized" when you actual convert your investment to cash (by selling it). Whatever happened in between when you bought your investment and when you sold it doesn't count. Typically the worst case would be that you lose your investment, as described in other answers, but there are a few more detailed situations (which are generally avoidable):

The worst case financially from normal investing is that you lose all of your money in such a way that you still have to pay a large amount of taxes. I don't know the tax details for India, but there was a recent question about this in the US. It is a fairly specific situation that is largely avoidable (be mindful of when you sell), but it's still a thing that happens to people.

The other worst case is that you somehow become confused about what you're doing and accidentally invest on margin (using borrowed money), so that you lose more money than you put in. This actually happens to a lot people, or at least they claim it was an accident. Again, this is avoidable. If the potential gains are high, usually the risks are high as well, so be very careful with anything where the potential gains seem unusually high. Always read the paperwork. Understand that if you're borrowing money you will have to pay it back, regardless of if the investment turns out well or not.


The question is really about risks and profit.

For normal investments (shares, real-estate and the like), you take a risk when investing, and you gain, if the asset produced some profit. The risk is effectively that your investment loses value (independent of the reason), i.e. you night not be able to re-sell it for the same price you bought it for ("principal")

If you were 100% guaranteed to get 100% of your principal returned, that would effectively mean you have a zero-risk investment (*1). If this investment produces interest / profit, it would be highly sought after - and the price of the asset would rise - to the point that the return on investment (profit$/investment$) becomes very low. Savings accounts are an example for low-risk-but-then-low-profit assets.

As a side note.. Before, i was writing about normal investments - with which I meant investments where you buy an asset. The risk of those investments are limited to the amount invested (and very likely not the whole investment, as has been pointed out before). There are other financial instruments, in which the risk may be higher than the investment (e.g. options, or other "derivative products")

(*1)note that a zero risk investment doesn't exist - even a zero-interest bank account has a risk to it, could be e.g. bankruptcy of the bank or inflation of the currency.


When you invest Rs. 100 every month, you get in return a (non-integer) number of units, each of which is worth the NAV of the mutual fund at each month of investment. When you redeem all your units in the mutual fund at the end of the 3-year period, the NAV of the mutual fund at the point of redemption is what you get.

Also note, the NAV used to convert rupees into units is different from the ANV used to convert units back into rupees (this is the spread of the NAV, and should be small or 0 ideally).

The kind of thing where you lose all your capital if the "NAV is below 100" at any time/the time of redemption would be an option (specifically, binary options). These are so risky that many jurisdictions have banned them outright.

  • 1
    If I understood your answer correctly, is it something like this for rs. 100/month : time 1 NAV=5, my units = 20 time 2 NAV=20, my units=5 time 3 NAV=1, my units=100 Total months=3, NAV=125 Redemption time Say, NAV=150, then would I get 125*150? Commented Jul 23, 2021 at 5:04

The worst thing that can possibly happen to a mutual fund investment is that you can lose all the money you invested in it, if something goes catastrophically wrong.

Note that this is not the worst thing that can happen in investing: at least your losses are limited to 100% of what you put into the mutual fund. In some cases, such as short-selling or writing naked calls, it's possible to "lose" (be liable for and required to pay up) an unlimited amount of money if things go catastrophically wrong.


This question keeps coming up. Unfortunately, the answer is not what people want to hear.

If you want to take control of your financial future, it really pays to change what you 'know' to be true.

There are -only- 2 certainties in investing (and life):

  1. Your fiat money will go to zero. Get rid of it (invest it).
  2. Nobody knows what's going to happen. All the predictions are worthless. If you invest based on what you read in the news you will almost certainly lose your money.

Other than that, you have to understand risk. Humans are amazingly bad at this. What's the risk of your fund's going to zero? It's definitely lower than you're chance of dying on the highway. Which one is worse? Worry about that one more. If I started investing today, my odds of losing 10% in 10 years is quite a bit lower than my odds of having a heart attack. It's irrational to worry, I'll go for a run instead.

Finally, mutual funds are not great investment vehicles. Their performance is generally lower than the broad market, and their fees are usually pretty high. I don't know the Indian market, but I'm guessing it's similar to mine (US/Canada). Our historical return is ~10-11% minus inflation. Anything lower than that is bad, anything higher than that is worse.

The best investment is for anyone young (< 50) to buy a simple index stock and forget about it. If you aren't comfortable doing that, the best investment - by far - is to invest in your financial education. If neither of those things is attractive, that's fine, but be aware you're costing your future self multiple years of earnings in exchange.

  • Welcome to Money.SE, nice first answer. Curious why <50? By the time I hit 40, I learned my lesson regarding trying to pick individual stocks, and am happy to ride the index funds for the rest of my life. Are you hinting at a different solution for >50? Commented Jul 26, 2021 at 12:41
  • "Anything lower than that is bad, anything higher than that is worse" — Why is it bad to have higher returns?
    – Flux
    Commented Jul 26, 2021 at 12:52
  • @JTP-ApologisetoMonica - well, I think the calculus changes the closer to retirement you get. Your personal situation is a bigger factor over just "as much $$$ as possible". I don't think blanket advice is such a great idea at that point. That being said I'm in the same boat, life doesn't stop when I die so the kids will inherit my portfolio.
    – FrozenKiwi
    Commented Jul 26, 2021 at 14:10
  • @Flux because beating the market over the long term is so very difficult. Even for fund managers that do beat the market, their clients tend to underperform because they jump in -after- the big run. The OP doesn't sound like he is interested in doing the deep dive necessary to accurately judge a fund's performance, so to maximize his odds it's best to just aim for 'average'.
    – FrozenKiwi
    Commented Jul 26, 2021 at 14:18

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