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Understanding Volatility Risk When Pledging Equity Mutual Funds for Loans
Manage irregular freelance income cycles using LAMF as a liquidity buffer.
Equity funds typically show a standard deviation of 15 to 20 percent, which makes LAMF a leveraged volatility strategy. If you borrow ₹5 lakh against ₹10 lakh of units, a 20 percent market decline can shrink your equity cushion by nearly 40 percent. This effective 2x leverage magnifies downside risk. In 2026, hybrid or large-cap funds are preferred for pledging due to lower margin-call probability.