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Mutual funds are investments that pool your money together with other investors to purchase shares of a collection of stocks, bonds, or other securities that might be difficult to recreate on your own. Since the pooled resources are invested in different securities, risk gets diversified and since the investments are done by an experienced, professional fund manager, investors are assured significantly better returns at relatively low risk.
Closed-end mutual funds have a predetermined number of units with a fixed maturity that are issued to the public via an initial public offering after which the units are traded at the exchange in the secondary market. The exit route for investors is to sell their units of the closed MF in the secondary market at the market price or wait till the fund matures to liquidate at NAV per unit.
Open- end funds are not traded on an exchange, neither do they have a fixed number of units that can be bought or sold nor, do they have a fixed maturity. Open ended MF allow investors to subscribe to (buy) or surrender (sell) their units at their will at the NAV of the fund on that particular day. Open-ended Funds offer much higher liquidity compared to close ended funds.
Your mutual fund investments earn returns in any of these three ways:
1.Funds receive cash dividend income on the securities they own and/or interest income
2.When prices of securities increase, and a fund sells securities at a higher price, it gains profits.
3.If a fund holds on to securities after their prices have increases, the Net Asset Value (NAV) of the fund increases and units can then be sold off at a profit.
Capital markets can be very volatile in nature where investments require periodic reviewing and rebalancing to ensure consistent returns. Lack of proper portfolio management can easily wipe out large part of one’s portfolio. Investors who are engaged in their respective profession and do not have the time or resources to understand the complexities of the capital markets are better off taking professional help. One of the cheapest and easiest alternatives available for investors is to avail the help of the mutual fund industry. Mutual funds allow investors to invest in a diversified portfolio of various asset classes managed by professional fund managers. Fund managers are generally highly qualified with significant experience in capital markets allowing them to make better investment than individual investors. In addition, fund managers also employ a team of dedicated research analysts who continuously search for investment opportunities. While navigating through the volatilities of investment opportunities, you can rely on professional fund managers to navigate in course.
Halal is defined as what is permissible under Islamic Law also known as "Shariah". Halal Investments are financial instruments which strictly follows Shariah investment guideline. Interest is strictly forbidden in Islam. Holy Quran states: O ye who believe! Devour not interest, doubled and multiplied; but fear Allah; that ye may (really) prosper. Shariah based mutual funds screens seek to eliminate: • bonds and other conventional interest-based investments • securities of companies in industries that do not comply to Islamic principles, such as liquor, conventional banks, tobacco. Equities and mutual funds are indeed Halal as long as the underlying company or the constituents of the funds doesn't breach the principles set by the Shariah Board. The investment objective of the Shariah based mutual fund is to generate capital gains by investing in Shariah compliant equity and equity-related instruments of well-researched value and growth-oriented companies. The main benefit of halal investment is that it encourages people to invest in a socially responsible manner. Investing according to Islamic principles can offer many benefits to Muslims and non-Muslims alike. Halal investing encourages a discipline-based investment decision. Generally, the low debt requirements of Islamic screens facilitate a conservative approach that appeals to risk-averse investors. Halal investing also discourages short-term speculation.
Fact: Mutual Funds (MFs) are investment vehicles which are not restricted to stock market investment only. MFs also invest in money market & debt market instruments Treasury Bills, Govt Securities, Certificate of Deposits, Commercial Papers and Corporate Bonds etc.
Fact: An Equity MF scheme typically invests in 30-40 stocks and it is not necessary that the stocks will replicate the stock market movement. Even in a bearish market, there would be some scrips that give very good returns. Further, a Fund Manager reviews the portfolio periodically to generate a good return.
Fact: It is difficult to time the market. Rather than timing the stock market, one should invest regularly and reap the benefits from cost averaging through strategies such as SIP & SWP.
Fact: Returns on investment in MFs are not taxable up to BDT 25,000.
Fact: MFs help the investor to invest even smaller savings towards wealth creation. One can invest as low as 500 units of any of our mutual funds.
Fact: Normally a person’s age would indicate his/her risk-taking ability – younger the age, greater would be this ability as they have a longer time horizon to earn and stay invested. A fund caters to a certain type of risk appetite. So, the selection of a fund for investment should be based on risk appetite of the investor and the time horizon. As a thumb rule, a retiree should go for low-risk investments such as balanced funds whereas a youngster who is at the beginning of a career has the propensity and resilience to take a higher risk exposure.
Net Asset Value (NAV) is basically the market value of all the securities held by the mutual fund and changes in NAV can be used to measure the performance of a mutual fund. The NAV per unit is the market value of all the securities held by the mutual fund by the number of units. Example, if the market value of securities is BDT 500 lakh, and the mutual fund has issued 10 lakh units of BDT 10 each, the NAV of each unit is BDT 50. Since the market value of securities changes every day, so does the NAV of funds.
The price or NAV that you pay for each unit, when you invest in an open ended mutual fund scheme, is called the purchase price. This may include a sales or entry load. The price or NAV at which you sell your investment units, and the open-ended mutual fund scheme buys them back from you, is called the surrender price. This price may include an exit load.
Entry and exit load is a certain percentage of NAV that you must pay while purchasing or surrendering units of an open-end mutual fund. For example, if a unit of an open-end fund cost BDT 10 and the load is 1%, you will need to pay BDT 10.1 for each unit you buy and will receive BDT 9.9 for each unit you surrender.
However, there are open-end funds that do not have any entry or exit load where you can buy and surrender units at NAV per unit.
The following documents are needed to invest in an open-end fund:
|For Individual Investors||For Corporate Investors|
|Filled up Purchase Form||Filled up Purchase Form|
|Copy of NID (Applicant)||Copy of Trade License|
|Copy of e-TIN (If any)||Copy of e-TIN|
|Passport Size Photo of the Applicant (2 Copies)||Copy of Certificate of Incorporation|
|Bank Statement/Bank Certificate/Cheque Leaf Photocopy||Copy of MOA|
|BO Acknowledgement from Brokerage House||BO Acknowledgement from Brokerage House|
|Copy of Nominee’s NID||Photocopy of Cheque Leaf|
|Passport Size Photo of the Nominee (1 Copy)||2 copies of photo of MD/CEO/ authorized person(s) with copy of NID|