Mutual Funds
Mutual funds were first initiated by the National Investment Unit of Pakistan in 1962. Small investors accumulate a large sum of capital with a professional individual commonly known as fund or portfolio manager. The portfolio manager processes all the investment transactions on behalf of its clients. Also, he has to provide advisory services to investors so that better and profitable investments can be done in diversifiable securities. The mutual fund can be categorized in two types, namely:
1. Open-End
2. Close-End
As the name implies, Open-end mutual funds allow continuous subscription and redemption of shares. The price of the share is determined on the Net Asset Value (NAV) after deducting redemption charges. Every day the portfolio manager computes the total amount of investments he holds and then computes the NAV. The higher the NAV the profitable the investment is.
Close-end mutual funds are first issued to general public and then transacted in secondary markets. The shares are usually traded at a discounted price in the secondary market. By observing growth opportunities is this sector fund managers have designed different investment products. They are:
- Growth Funds: Regardless of the fact that income on a particular investment is low, these growth funds provide an opportunity to appreciate the share value over a period of time. The income remains constant but a growth trend can be observed on the overall NAV.
- Income Funds: The situation of income funds is opposite to growth funds. It provides incremental returns on investments but has a low probability for growth. These are also known as "Bond Funds".
- Balanced Funds: It is combination of growth and income funds. An investor can generate high earnings on its investments. Similarly, it also offers moderate potential for appreciation in stock's NAV.
Mutual funds are considered to be least risky sort of investment products, as an investor can sold the mutual funds at any point of time, when he wants to liquidate his investment. Many of the investors inject their funds in acquiring best mutual funds available in the market. These funds offer moderate returns as well as carry low risk as compared to other investment products.
There are four top mutual funds presently available in the market, namely:
- Vanguard Mutual Funds
- Fidelity Mutual Funds
- Janus Mutual Funds
- T Rowe Price Mutual Funds
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Fidelity mutual funds are considered to be the major competitor of Vanguard. Fidelity at present is offering 300 mutual funds. The fidelity mutual fund can either be a stock or a bond or a blend of both. The fidelity mutual funds are popular for their innovation and creativity
Janus mutual funds hold the third position among mutual fund ratings of companies. T Rowe price mutual funds are also famous among different mutual fund families.
In order to invest money in mutual funds, one must have a clear understanding of mutual fund ratings of different companies. Similarly, he must take necessary guidance from mutual fund managers, as they are professional in carrying out mutual fund research in an effective and technical manner.
An appropriate mutual fund analysis should be done before hand, so that profits can be earned from investment. If an investor wants to save his time and cost he must undertake the services of a brokerage firm. Brokerage firms prepare different mutual fund analysis reports that tell the investor about mutual fund performance, its scope and growth in the market. The brokerage houses also compare mutual funds of different mutual fund companies, to show the investor that which mutual fund family will be appropriate to invest keeping in mind the present economic and political conditions of the investment market.
The investors can also take help from the mutual fund guidelines available online. In this way one will be in a better position to evaluate that whether the particular investment product is a top mutual fund or is it a no load mutual fund.
