Investments in mutual funds
In order to make informed and informed decisions about buying or selling shares, you need to acquire the necessary knowledge and skills, as well as some experience in the stock market. Often some people do not have time for this, others are simply not interested in analyzing the stock market, others, realizing that investments in shares are associated with a high level of risk, want for their investments a more “safe haven”.
For such investors, the best option would be to invest in mutual funds, abbreviated – mutual Funds. Such funds exist both in Russia and abroad, only there they are called Mutual funds.
So, what is a mutual Fund? Roughly speaking – it is a portfolio of shares traded on the stock market, selected in a certain proportion by the management company. The function of the management company is to accumulate depositors ‘ money, invest it in profitable instruments (shares, bonds), as well as adjust their shares in the Fund depending on the current market situation. The Fund is divided equally into conventional units (units), and by investing in the Fund (buying units), the investor buys not a single share, but part of the total package of shares of which the Fund consists. This significantly reduces the risk of investment, because it corresponds to the rule of diversification (distribution) of funds for different types of assets. In addition, the investor himself does not participate in the management of the Fund, it makes the management company. This is another advantage of the Fund – you do not need to be a specialist in asset management in the stock market, you are managed by a professional. Of course, the management company (hereinafter – UK) takes a fee for their services, ie, each purchase of shares, the investor needs to pay an additional Commission, but more on that below.
What are mutual Funds
Mutual funds are classified according to several criteria: the level of risk, the type of securities that are purchased at the expense of the Fund, the degree of freedom of investors, and so on.
The composition of securities mutual Funds are of the following types:
The equity funds.
Share PIFs, as the name implies, consist of shares of companies (open joint stock companies). The shares are purchased by the management company with money contributed to the Fund by shareholders. When the price of the stocks included in a mutual Fund grows (by results of trades on stock exchanges), increasing the price of the shares of the mutual Fund. When the share price falls, the shares also fall in price. The task of the management company is to buy shares that should rise in price and sell shares that should fall in price. From how aptly CC guesses (hopes)? which shares to sell and which to buy depends on the yield of mutual Funds. Mutual funds are the most risky type of mutual Funds. Yields range from negative to high positive.
Mutual funds bonds.
Bond mutual funds are the least risky investments, although they can be unprofitable, but the probability of loss is very low. Obligatory companion low risk – low yield. The yield in bonds mutual Funds is about the same as in Bank deposits, 8-12%. Bond mutual funds can be used as a refuge for capital during a market crash.
Mixed Mutual Funds.
Mixed mutual Funds (mutual Funds of mixed investments) is a hybrid of mutual Funds shares and mutual Funds bonds, i.e. they consist of both types of securities. From such funds as flexible as possible strategies: they can be up to 100% of the shares at the market growth and 100% of the bonds during the fall of the market. In periods of uncertainty in the market, when it is not clear where the market will move tomorrow, such funds are the best option for investing.
Also, mutual Funds differ in the freedom of the shareholder to choose the time to buy and sell shares:
Open Mutual Funds.
If the mutual Fund is open, you can buy, exchange and repay shares on any working day.
Interval Mutual Funds.
Interval mutual Fund units can be bought, exchanged and extinguished only at certain fixed intervals several times a year (usually two weeks four times a year).
Private Mutual Funds.
Closed mutual Funds invest in such assets that can not be partially sold to pay off the shares of one or more shareholders, and it is possible only to sell all the property of the mutual Fund and pay off all the shares.
In addition, the funds are sectoral (with the money of the Fund purchased shares of companies of any one industry, for example, oil or metallurgical), index (the composition of shares purchased with the money of the Fund copies the composition of the shares of the MICEX or RTS index, so such a Fund grows or decreases in accordance with the index).
How to choose a Fund
Investments in mutual funds
Every investor who invests his savings in mutual funds should understand that mutual Funds are a “long-distance race”; in other words, funds give a tangible profit only for long-term investment – from 5 years or more. Therefore, the funds that you may need in a shorter period of time, it is better to invest in other assets, but more on that later.
First we need to choose a management company. Ratings CC easily find in Internet, for example, on address: http://pif.investfunds.ru/funds/rate_management.phtml. There, companies are ranked by the volume of NAV (in other words – the size of funds), the number of mutual Funds in management, profitability indicators. However, high performance in the past does not guarantee the same high performance in the future.
The investor at this stage needs first of all the reliability of the company. It is therefore necessary to check that the UK was working on the market for at least 5 years, the longer the better.
Next, you need to compare the fees charged by management companies. Naturally, the lower the Commission, the more attractive the management company. It is also not bad that the company is a tax agent, that is, when making a profit at the time of the sale of Fund units itself withheld income tax, freeing the investor from tax procedures (filling out a Declaration, transferring funds to the tax, etc.).
Taking into account the considered indicators, the author considers the management companies “Alfa-Capital” to be the most reliable and convenient for work (http://www.alfacapital.ru/individual/pifs/) and VTB Capital – asset management (http://www.vtbcapital-am.ru/), but this is his personal opinion.
Once decided on the management company, proceed to the selection of the Fund. A lot depends on the investor – his ability to understand the market and its individual segments, risk appetite, etc. If the investor is aiming to maximize profits, it is better to choose a stock Fund. But at the same time, it is necessary to understand that the possible profit and risk are interrelated and directly proportional, that is, the higher the potential profit, the higher the possibility of losing funds in an unfavorable situation on the market and Vice versa. Investors who are more interested in the safety of their savings than in making a profit can be recommended bond mutual Funds, they are much more stable than equity funds, but the average yield is significantly lower there. If the investor is well versed in one of the industries (oil and gas, metallurgical), then he may be interested in industry funds specializing in shares of companies in a particular industry.
So, with the view of the Fund has determined, and now look at the date of establishment of the Fund. It is important that the Fund has existed for at least 3 years, so that it can be traced to its historical profitability. Historical profitability is the most important criterion when choosing a Fund! To assess it, you need to compare the yield of the Fund with the MICEX or RTS index. This can be done, for example, on the website http://pif.investfunds.ru/, there is a convenient interactive chart on the main page. The Fund is attractive if its historical return for the last 3 years is higher than the return of the index. The index is a statistical indicator characterizing the General state of the market. The index includes securities of the largest companies traded on the stock exchange. If the Fund shows a yield below the market, it is more appropriate to invest in an index Fund, the composition of which repeats the composition of securities included in the MICEX index. Such a Fund has a yield equal to that of the index.
Choosing a management company and a mutual Fund, you can start investing directly. To do this, you must contact the management company via the website or by phone. If You decide to deal with the company “VTB-capital asset Management”, to simply come to the nearest branch of the Bank VTB24 and sign a contract with the management company. Then you just need to transfer funds to your account in the UK, in other words, to purchase units of the Fund. To sell shares, you need to come back to the office of the criminal code and apply for the sale of shares. Transactions for the purchase or sale of shares are carried out within 2-3 days from the date of application.
Investments in mutual funds
And finally – a few recommendations from the world Councils on investing in mutual funds.
Do not invest all funds intended for investment in one Fund. This is an extra risk, without which you can do, because the cost of a separate Fund can both grow and fall, and significantly. Pick a 2-3 Fund with a stable and high yield and buy shares of all three. Those who consider themselves ready for risk and are going to buy shares of equity funds, it is best to hedge by including in the investment portfolio of bonds or mixed funds. In case of an unfavorable situation in the market, this will make the fall not so noticeable.