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Rebecca RobertsVeteran · Tutor for 11 years
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Mutual funds are considered a high-risk form of investment primarily because they involve buying stocks, bonds, or other securities that have unpredictable values. The value of a mutual fund is determined by the performance of the securities it decides to buy. So, if the stocks do well, the fund increases in value. If the stocks do not do well, the fund decreases in value. Therefore, the risk comes from the fact that the performance of these securities can be quite volatile and unpredictable. They do not necessarily rely on risky practices such as investing borrowed money. They are not owned or controlled by the federal government, and their withdrawal or holding period largely depends on the specific mutual fund's structure; there is usually no fixed period like 30 years.
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