Written by Ilham Indra, Marketing Communication at PT Korea Investment Management Indonesia. Reviewed by Compliance before publication.
This question deserves a direct answer rather than a softened one. A vague answer does a disservice to someone weighing a financial decision.
Can a Mutual Fund Lose Money?
Yes. The value of a mutual fund investment can fall, including below the initial subscription value. No mechanism guarantees the value will return, and no type of mutual fund is risk-free.
Why Can It Lose Money?
Portfolio asset prices fall
This is the most common cause. Net asset value per unit follows the prices of securities in the portfolio. When those share or bond prices fall, the value per unit falls with them.
An issuer defaults
If an issuer of debt securities held in the portfolio cannot pay its coupon or return principal, the value of that asset falls and affects net asset value.
Assets become hard to sell
If securities in the portfolio are hard to sell at a fair price, the investment manager may have to sell at a less favourable price to meet redemptions.
How Much Movement Does Each Type Carry?
| Type | Main source of fluctuation | Range of movement |
|---|---|---|
| Money market | Short-dated instruments | Narrowest |
| Fixed income | Interest rate movements | Moderate |
| Balanced | A mix of bonds and shares | Moderate to wide |
| Equity | Share prices | Widest |
The table shows ranges of movement, not losses that will occur. This article quotes no historical loss figures for any product, because such figures cannot be applied to the future.
What Cannot Happen?
The most common worry is that the manager runs off with the money. The structure of a mutual fund is designed to prevent exactly that.
Investors' cash and securities are held by a custodian bank, not by the investment manager. The manager makes investment decisions but does not hold investors' money, and those assets are kept separate from the manager's own.
This protection concerns the safekeeping of assets, not movements in value. Losses from falling market prices remain possible.
How Can the Risk Be Reduced?
Match the fund type to the horizon of your goal, not to the return you hope for.
Avoid placing money needed within months in a type that fluctuates widely.
Read the prospectus, particularly the investment policy and risk factors, before buying.
Understand that fluctuation is normal, and that selling while the value is down locks in that loss.
Past performance does not guarantee future performance.
About the Manager
PT Korea Investment Management Indonesia is an investment manager registered with and supervised by the Financial Services Authority under licence number KEP-50/D.04/2019, operating in Indonesia since 2019.
Frequently Asked Questions
Can a mutual fund lose money?
Yes. The value can fall, including below the initial subscription value.
Which fund type fluctuates least?
Money market funds have the narrowest range of movement because they hold short-dated instruments. That does not make them risk-free.
Could the manager run off with the money?
Investors cash and securities are held by a custodian bank, not the investment manager, and kept separate from the manager own assets. This protects safekeeping, not value.
Are mutual funds covered by deposit insurance?
No. That scheme covers bank deposits such as savings and time deposits.
What should you do when the value falls?
Review whether the fund type matches the horizon of your goal. Selling while the value is down locks in that loss.
Can a money market fund lose money?
Yes, even though it fluctuates least. Net asset value per unit can still fall if portfolio instrument prices fall.
Next Steps
Understand how assets are safeguarded in our article on how a mutual fund works.
See the range of funds managed by PT Korea Investment Management Indonesia on the Products page.