A booze is a peculiar form of collective investment with subsequent profit. The money resources of many investors are added to a single fund and some assets are acquired on them. They are bonds, depersonalized metal accounts, stocks, deposits, real estate, that is, a standard gentleman's set of financial instruments permitted by law. The activities of the fund's employees are aimed at maximizing profits with the help of funds received under management, so that the assets of the fund increase and the shareholders can get their profit.
Mutual Fund Benefits
Starting capital may be small. Some funds are ready to accept a contribution of one thousand rubles. You won’t have to study the market yourself. This is already done by specially trained people working in the fund.
How it works
Not every organization, let alone a private individual, can create a mutual fund. This is a licensed type of activity. The license is issued by the Federal Service responsible for control over the financial markets of the Russian Federation. This body both issues a license and controls the subsequent activities of the mutual fund. The audit takes place for three years at least once. That is why the fund must conduct all operations correctly and work within the framework of the law.
Once a license is obtained, the fund may begin to attract investors (shareholders). It can be both citizens and organizations. Each person can buy shares for a certain amount of funds, and this amount goes to managers. A fund with the money of investors can buy securities that are in free circulation and, making such transactions, makes a profit, which leads to an increase in the value of the fund’s assets, which means that the value of the units increases.
Pai - what is it?
An investment share is a registered security that records the fact that an investor invested in a fund of a certain amount of funds. In other words, the investor thus fixes his own right to a share of the unit investment trust property. The ownership right is documented through an entry in the personal account of the depositor, which is open in the mutual fund register. The number of units the investor will own is likely to be a fractional number.
Change in unit value
The value of units, like the value of any other asset, is subject to investment risks. The unit does not have a nominal price, but with a certain periodicity, its estimated value is calculated. So, open-end mutual funds calculate the share price every working day (on holidays and weekends, the cost is equal to the price for the last working day).
Interval mutual funds do this on the last day of the interval (the period when units can be redeemed and acquired) and the last business day in the month. Closed mutual funds calculate the value on the last business day of the month and the day following the last day of filing applications for the purchase of additional units. All operations on the purchase / sale of units of this fund are made based on their price on the last day when applications were accepted.
The cost of units is calculated simply: the price of net assets of a mutual investment fund (NAV) is divided by the number of units. Information about them can be viewed in the register of fund contributors. The net assets of the mutual fund are determined by deducting the size of the fund’s liabilities from its assets (funds held in the fund’s deposits and on its accounts).
Yield guarantee
There is no guaranteed return on mutual funds, like other financial instruments. Everything determines the value of supply and demand for stock assets. And shares of investment funds cannot give guaranteed returns. Moreover, the information on the mutual fund cannot be said about guarantees regarding profitability during the work of the management company in the future. This is described in more detail in article 51 of the Federal Law “On Investment Funds”. However, the future investor must understand that only low-yield instruments such as bank deposits and bonds can guarantee profits. It is just necessary to minimize risks at the selection stage, and then the profitability of mutual funds will help to increase funds.
How profit is formed in the fund
If the investor decided to invest one hundred thousand rubles into the fund, and the cost of one share was four thousand rubles at that moment, then he will be able to acquire twenty-five shares. Suppose, after some time, the assets of the fund have risen in price, and the cost of one share has become equal to six thousand rubles. The value of all shares acquired by the investor, in this case, became one hundred and fifty thousand rubles. So he was able to earn fifty thousand rubles, excluding commissions and taxes. This is how each of the shareholders can make their own profit using shares of mutual funds.
Rules for a successful investment
The essence of the rules is simple. Invest should be for a long time. Mutual Fund is a tool for long-term investment (from two years). Therefore, all invested funds should lie quietly for the next two to three years and generate profits. Such an investment is good in that it is not affected by the short-term fluctuations to which the stock market is so exposed. This provides a higher level of profitability.
The second rule follows from this: invest free funds that will not be needed in the near future. Investments for a short period are possible and, perhaps, even with a profit. But this approach does not guarantee income from each investment in mutual funds. You should invest in reliable mutual funds, the reviews and ratings of which indicate the possibility of making a profit.
Mutual Funds Rating
It is easy to get information about the results of the activities of a fund. It is in the public domain. But when studying it, it is worth considering a number of points.
- What is the rating of the management company in terms of the amount of funds raised over the past year? Two years? Three? Studying the rating of mutual funds, it should be understood that the investor invests funds for a long time, and it is the ability of the management company to manage the funds of investors that will determine the security of investment and the success of investment.
- What is the rating of the management company in terms of net asset value? This value indicates how much funds of fund participants is managed by this management company. And the higher it is, the higher is the popularity of the management company, which means more confidence in it.
- What is the rating of mutual funds in terms of attracted funds? It is better to check this figure for a year and for three years.
- What is the mutual fund rating for net asset value?
- What is the mutual fund rating for profitability? It is this rating that attracts the attention of investors in the first place. This indicator builds funds in terms of the amount of profitability that they were able to achieve over a period of time. For example, the management of Sberbank mutual funds led to the fact that the Sberbank - Global Internet Fund issued a 49.91% return for the year.
How to buy shares?
There is nothing complicated. It is enough to be in the office of the management company or contact its intermediary. The role of intermediary is often played by investment companies or banks. It will be proposed to fill out and sign the following documents:
- Application for opening a personal account. When the management company has several funds, and the investor decided to make contributions to more than one fund of this company, then accounts must be opened for each contribution.
- Registration of a registered person.
- Application for the purchase of investment shares.
All documents are prepared and signed in triplicate, and when working with an intermediary - in four. With papers, of course, there is a bit of trouble. After a couple of days from the management company will receive an order to purchase shares with all the details.
Units for sale
This action is similar to a purchase. You will also have to visit the office of the management company and write a statement, in this case, on repayment. Usually only a passport is required from the documents, however, information about the number of shares held by the investor and the personal account number are necessary. Therefore, it is better to go with a full package of documents.
It is worth remembering that the sale and purchase from different mutual funds are carried out differently, or rather, at different times. Open funds, of which the majority, will allow the investor to sell on any of the working days, interval - at the time the interval is opened, closed - when a unit investment fund is formed or additional units are placed. But there may be exceptions.
Operations for the sale and purchase of shares using a broker
Operations with shares through a broker have their advantages.
- Buying units of closed-end and interval funds is possible on any day when the exchange operates.
- It is possible to avoid premiums on purchases and discounts on the sale of shares.
- The speed of the investor's application.
- No need to get to the office of the management company.
However, there are also disadvantages. Not every mutual investment fund puts its shares on the stock exchange. Promstroibank, Metropol, Interfin Capital, Uralsib are examples of management companies listed on the stock exchange. Sberbank Asset Management, whose mutual funds are listed on the stock exchange, is also one of the largest management companies. These units do not have the highest liquidity and therefore the spread will be high. Instead of allowances and discounts, commissions to the exchange and broker will appear (even if they are several times lower), as well as a fee, though not always, for depository services.
Mutual fund. Banks
Many banks practice the service “Deposit plus mutual funds”. Thus, when placing funds, a part of the investor places them at interest in the form of a contribution, and the rest is acquired by units of mutual investment funds managed by the management company of the same bank. Whether this is good or bad depends on the work of the management company. Indeed, with its good activity, the yield on shares will exceed the interest on the deposit, which, of course, will bring joy to the investor. Otherwise, the investor will regret the lost profit that he could have received when he placed all available funds in the form of a deposit at interest.
Taxation
Profit tax will have to be paid only upon redemption of units. And this is the only payment that you need to "give" your favorite tax. Profit is easy to calculate - this is the difference between the current value of the units and the cost of their purchase. Typically, the calculation and withholding of this tax on individuals is the responsibility of the management company. This means that the investor will not have to deal with the self-completion of the tax return. For residents, the tax will be 13 percent, for non-residents - 30 percent.
Shareholder Expenses
Two main types of commissions practiced in mutual funds can be distinguished.
- Commission increasing the value of the unit upon purchase (premium on purchase). It should not exceed one and a half percent of the estimated value of one share. Some management companies do not charge it at all.
- Commission reducing the value of the unit on sale (discount on sale). It should not exceed three percent of the estimated cost.
The remuneration of the management company, appraiser, auditor, registrar, depository also relates to the expenses column. But they all lie within a few percent and are taken into account when calculating the value of shares.
Main players
- Uralsib. Mutual Funds: Uralsib First, Uralsib Prospective Investments, Uralsib Eurobonds, Uralsib Financial Sector, etc. Recently, there have been few positive reviews about Uralsib funds, and all of them are focused on non-core forums. The management company Uralsib, whose mutual funds initially showed very good returns, is now being criticized by investors. Many investors believe that they themselves could achieve much better profitability results.
- VTB mutual funds: VTB - Eurobonds Fund, VTB - Equity Fund, VTB - Balanced Fund, VTB - MICEX Index, VTB - Telecommunications Fund, etc. VTB funds vary in profitability, but many complaints are received customer service. Therefore, considering VTB mutual funds as an investment tool, you need to be prepared for this.
- Sberbank has the main management company - Sberbank Asset Management. Mutual Fund: Sberbank - Natural Resources, Sberbank - Financial Sector, Sberbank - Europe, Sberbank - America, Sberbank - Gold, etc. This UK has established itself as reliable, which is not surprising.
A few questions about mutual funds
Is giving of shares possible? Yes it is possible. It is enough to conclude a standard gift agreement in ordinary writing.
Can shares be inherited? Yes, they can, in general order. The Civil Code of the Russian Federation describes in detail how this is done.
Conclusion
So, mutual funds are a great way to invest and increase your funds. The main thing is to choose a worthy fund. When comparing a mutual fund and a brokerage account as investment methods, a novice investor should dwell on the first option. After all, in addition to the advantages described above, there are additional ones:
- You can invest a small amount of money and get the benefits of the most profitable instruments (index portfolio, real estate and others).
- Investor, investing money in mutual funds, trusts management to professionals (in this regard, the fund is similar to trust management).
- Although investing in a mutual investment fund does not allow you to use all the opportunities of the securities market yourself, the depositor frees up his time for other matters. And this, you see, is also a huge plus.
In other words, if an investor does not like to deal with all the tricks of the securities market, but wants to invest, then mutual investment funds are exactly the tool that will not only save but also increase accumulations.