How can risk be understood in simple terms in a mutual fund?

Defining and understanding the risk element is important when it comes to mutual funds.

The basic risk in a mutual fund is that the investment might not perform as expected.

In an equity fund this could mean that there is a capital loss.

In a debt fund it could be that there is a lower return than what was expected.

Investors should understand that this means that lower returns than normal or even loss of capital.