Mutual funds – investlink

MUTUAL FUNDS BASICS

A mutual fund is essentially a professionally managed investment vehicle. It gathers capital from a large number of investors and channels that combined pool into a mix of assets — equities, bonds, money-market instruments, or a blend of these. This collective set of holdings is referred to as the fund’s portfolio, and each unit or share reflects an investor’s proportional claim on the fund’s assets and the earnings they generate.

Diversification

Over the last ten years, mutual funds have become an increasingly popular choice among Pakistani investors planning for retirement and other long-term financial objectives. The appeal largely comes from built-in diversification and access to expert portfolio management. That said, mutual funds are not risk-free — returns can be affected by market performance, and investors should also account for applicable fees and taxes. Understanding both the benefits and the trade-offs is essential before selecting a fund that aligns with your financial goals and risk appetite.

Transparency

Mutual funds are watched by regulators, settlement house (stock exchange), trustee, auditors and in our case Shariah auditor also. Multiple levels oversee and audit builds trust of investor as it makes investment process very transparent. In addition to this, the Fund also prepares and discloses periodic financial statements, which provide an in-depth review of all the major activities undertaken by the fund over the period.

Professional Management

Mutual Funds keep a team of experienced and skilled professionals for the investment decision making. Team consists of dedicated fund management and investment research team which analyze the performance and prospects of companies and selects suitable investments to achieve the objectives of the fund. The Fund Manager has the experience and resources necessary to follow the markets, select investments, and track their performance.

Tax Benefits

To induce saving habits in general public, Government of Pakistan has given incentive to investor in form of tax rebate. An investor can claim tax rebate by investing in mutual funds and reducing his tax liability to government. Also, investments held by investors for a period of 48 months or more qualify for exemption from Capital Gains Tax

Affordability

As a small investor, you may find that it is not possible to buy shares of companies with high share price. Such companies have low share base and high profits as a result investors allocate them higher price. Mutual funds access to pool funds allow to buy securities in market in every price category. Through mutual funds investors can enjoy a diversified portfolio by investing as low as Rs 5,000.

Convenience

Investors remain occupied with their daily task and find it difficult to follow market on daily basis. Mutual funds on other hand acts on your behalf and monitor your investment on minute to minute basis. Being expert in their area, they are also better equipped to make decision on timely basis.

Well Regulated

All Mutual Funds are registered with SECP and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SECP. In addition to that, mutual funds assets are placed with trustee to further ensure investors asset protection. Shariah compliant mutual funds’ operations are oversight by a renowned Shariah Advisor to ensure the compliance with the Shariah guidelines.

Concept

A Mutual Fund is a single portfolio of investments where investors put their money to be managed by an asset management company on behalf of its many investors. This allows each investor access to a professional managed pool of funds.
Fund Manager invests the fund’s capital in profitable avenues and attempt to earn a return for the fund’s investors. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them.
The flow chart describes broadly the working of a mutual fund:

FLEXIBILITY

Mutual Funds provide various value added services which makes it very easy for investors to manage and track their investments. They can even invest or redeem in mutual fund by just sitting at home through online transactions.
Mutual funds have goal based plans such as Systematic Investment Plans (SIP) and Savings Plans which are convenient for investors to invest and achieve their long term objectives such as kids’ education or marriage.

Liquidity

Liquidity simply means being able to access your money when you need it. With mutual funds you can buy.

Choice Of Schemes

Mutual funds offer a variety of product schemes to suit your varying needs and financial goals.

Return Potential

Due to their expertise in investment decision making and availability of dedicated resources

Benefits Of Funds

Benefits of mutual funds"mutual fund"offers especially for individuals who prefer not to be involved