Price Risk. The value of assets (stocks, Sukuk, commodities, etc.) constantly changes. It is the nature of the market.

How to manage price risk? Price risk, which constantly arises in the short term, decreases over the long term. Since mutual funds are long-term investments, price fluctuations you see in the short-term become less impactful over time. The overall risk of losing money tends to decrease as your investment horizon stretches out.

Risk of Poor Management. Your investment's success hinges on the management company's ability to pick a winning strategy and navigate the ever-present challenges of the market. Poor choices by the manager can cause the fund to lag behind its competitors and the benchmark it tracks (target index). This underperformance signifies a poorly constructed portfolio, likely leading to disappointment for investors.

How to manage the risk of poor management? To manage the risk of poor management, you need:

• Selection Strategy: Prioritize funds with a track record of consistent performance, ideally exceeding their target benchmark (index). This indicates a skilled manager.
• Active Monitoring: Regularly track your fund's performance compared to its benchmark and similar funds in the same category. Focus on long-term results (at least one year, preferably three) to avoid getting swayed by short-term market noise.
• Diversification is Key: Spread your investments across multiple funds managed by different companies. This reduces the risk of a single manager's underperformance impacting your overall portfolio.

Liquidity Risk. Liquidity refers to the ability to quickly convert an asset into cash with minimal loss in value. When investing in fund units, it's important to recognize that these are long-term instruments and are not easily converted to cash quickly. For instance, exiting an open-end fund can take up to 10 working days, or about two weeks. Converting units in closed-end funds can often be more challenging. Real estate investment funds typically redeem units no sooner than six months after entry. An exception is investment funds with units traded on an exchange, which can be sold through a broker. However, even then, you should expect a difference (spread) between buy and sell prices that can reach 3-5%.

How to manage liquidity risk? If liquidity is important to you, consider choosing open-end or exchange-traded investment funds.

Fraud Risk. This risk is ever-present, and investment funds are not exempt. The best safeguard is the independence and integrity of the management company, special depository, and auditor.

How to manage fraud risk? Choose a large management company with a well-known auditor.

Risk of Non-Transparent Strategy. Knowing the fund category doesn't fully reveal where the management company is investing the money or the risks involved. Moreover, the fund's name and the bright words in its advertisement might not accurately reflect its strategy. For instance, an equity fund might be labeled "reliable," "protected," or "conservative," yet actually invest in aggressive stocks.

How to manage the risk of a non-transparent strategy? At a minimum, study the fund's investment declaration. Additionally, you can review the fund's portfolio, which the management company is required to disclose regularly.