Technically yes, realistically almost impossible.
But “safer” depends on which unit trust you pick. Not all are equal.
1. Can you lose 100%? Extremely unlikely
To lose everything, all 30-50 companies + bonds in the fund would have to go bankrupt at the same time.
That’s like saying the entire CSE + government bonds all hit zero. If that happens, your FD is also gone because banks would collapse too.
Has it ever happened in Sri Lanka? No. Not even during 2022 economic crisis. Worst equity funds dropped 35-40% that year, then recovered 2023.
2. Can you lose money? Yes, temporarily
| Fund type | Cn you lose money? | Worst 1-year drop inLK | Recovered? |
| Money Market Fund | Very rare | ~0% to -1% | Yes. within months |
| Incom/Bond fund | Yes, if rates spike | -5% to -8% | Yes, 1-2 years |
| Balanced Fund | Yes | -15% to -20% | Yes, 2-3 years |
| Equity Fund | Yes, big time | -30% to -40% | Yes, 3-5 years |
Example: 100k in NDB Growth Fund in Jan 2022 → 65k by Dec 2022. Painful. But by Dec 2023 → 91k. By Aug 2024 → ∼115k.
If you sold in Dec 2022, you locked in -35%. If you waited, you’re up +15%.
3. What actually makes unit trusts “safe”
- Diversification: 1 unit = pieces of 40 companies + T-bills. 1 company fraud = you lose 2%, not 100%.
- Regulation: SEC of Sri Lanka + trustee bank holds the assets. Fund manager can’t run away with cash. Even if NDB Wealth shuts down, your units are held by Deutsche Bank trustee.
- No leverage: Unit trusts in LK can’t borrow to invest. So they can’t blow up like hedge funds.
- Separation: Your money is NOT on fund company balance sheet. It’s in a trust.
4. How you ACTUALLY lose money
- Sell during a crash: Market drops 30%, you panic, withdraw. Loss becomes permanent.
- Wrong fund for timeline: Put emergency cash in Equity Fund, market crashes, you’re forced to sell at -25%.
- Fund company fraud: Very rare. Last major case globally was 2008. LK has no cases so far. SEC audits yearly.
Bottom line
- You won’t lose ALL your money unless Sri Lanka’s entire financial system collapses.
- You can lose 20-40% temporarily in Equity/Balanced funds. Recovers if you wait 3-5 years.
- Money Market Funds are ∼99% safe. Worst case you earn 0% for a few months.
Golden rule: Only put money in Equity funds that you won’t need for 5+ years. If you can’t see -30% without panicking, stick to Money Market + FD.
