A mutual fund is an investment alternative made up of contributions made by individuals and companies. These contributions constitute what is defined as the fund’s assets. A Mutual Fund is an investment instrument whose function is to gather the monetary contributions of different people, natural or legal, to invest them in different investment securities. By combining the capital of different people, different investments can be accessed under advantageous conditions in order to obtain a return for the participants.
The money invested in a Mutual Fund is managed by a management Company that specializes in managing different investment portfolios, which may be made up of different securities, such as: stocks, corporate and public bonds, real estate assets, international securities, other funds. investment, mortgage bills, etc. The way the portfolio is composed is defined in the Mutual Fund contract, in this way the investor will make the decision to participate or not according to the preferences he has.
A mutual fund is an open investment company, which receives money from all interested investors, to then invest these resources and obtain a return, to then distribute it among the investors.
Advantages of having Mutual Funds:
- You can sign your General Agreement on Mutual Funds 100% Online. Here
- Your funds are managed by expert investment professionals.
- You can have your money at any time.
- You get a daily return, which you will see reflected at the end of the month.
- You can get tax advantages depending on the type of fund you invest in.
Cost to invest :
The administration of the Mutual Funds is subject to an annual administration commission of the Management Companies, and / or for certain operations (entry or exit of the Mutual Fund, for example). All commissions are detailed in the Simplified Prospectus of the chosen Mutual Fund, which is found on the website of each SAF or on the website of the SMV.
The Association of Fund Administrators of Peru advises that each investor knows which type of mutual fund is best for them. Although it is true that several people save in the same fund, not all have the same objectives or investment terms, or the same risk tolerance, for this reason it is important to inform yourself and get prior advice to correctly choose the type of mutual fund according to your risk profile, either: conservative, moderate or risky.
The money invested in a Mutual Fund generates variable returns on the investments made. They are said to be variable because the results of the past do not guarantee that they will be repeated in the future, being able to obtain profits or losses depending on the behavior of the market, as in any investment product. On average, the profitability of the Mutual Funds can exceed other savings and investment products, so they are attractive opportunities to invest your money easily, directly and safely.
You only need to approach any entity authorized to sell shares of Mutual Funds (distribution or placement agents) such as banks, finance companies, stockbrokers and others authorized by the SMV, with your DNI and the initial amount you want to invest. Your contributions are invested by the Management Companies according to the rules of the Mutual Fund that you have chosen and may generate a variable return so that you achieve the expected profit. Remember that the expectation of obtaining greater profits implies assuming greater risk and that investments must be permanently monitored by the participant.
How to choose a Mutual Fund?
If your investment objectives are related to accumulating a sum of money for the next vacation or to pay off debt in the coming months, you may need to save in a Short-Term Debt Instrument Mutual Fund. On the other hand, if your savings goals have to do with buying a home or financing your children’s college education, you may prefer to save in Medium and Long-Term Debt Instrument Mutual Funds or in a Fund Mutual Capitalization.
Any form of investment carries risk. Investing in mutual funds means investing in a diversified way, not concentrating all your savings in a single type of investment. This is important because by distributing your savings across different investments, you are reducing the risk that an unexpected period of low returns on one type of investment will affect your total savings. Diversifying allows, on average, those investments that have had a lower return than expected, are offset by those whose profitability has been higher than expected.
Check the types of funds
– Equity funds : If you want a long-term investment with high returns over time, and are not afraid of risk, think of a fund of this type. If volatility does not go with you, avoid variable income or reduce your investment in it.
– Fixed income: It is designed to obtain known returns, but in general, lower than those that equity funds could deliver. It is also recommended for people who want a stable profit over time, although it is not insured.
– Short-term mutual funds: In general they compete with the classic term deposits. The decision to opt for one or the other will depend on whether you want absolute security, but tied to a fixed term (in which case a deposit would suit you), or instead prefer a profit not fully insured, but without tying a fixed term .
Don’t invest in a fund based on its past performance
A fund’s good performance may be the temporary result of specific circumstances that will not necessarily recur in the future. Past performance provides important information regarding how risky a fund is and whether it has behaved similarly to the market and to comparable funds not to its future performance. Therefore, it is not convenient to invest in the most profitable one-year fund, guided only by this factor.
Review your subscription contract
At the time of investing you must sign a quota subscription contract and the managing company must inform about the internal regulations of the fund that must contain, as a minimum, the following information:
– Remuneration charged by the company for the fund administration.
– Commissions charged on the investment.
– Redemption payment period (in how long the money invested in the fund is returned).
– Resource investment policy.
– Investment plans.
How your mutual funds are managed
The managers of a fund – portfolio managers – are based on many economic, sector and company studies and their experience in the market. They also analyze trends in prices, interest rates, and the exchange rate (dollar). They are advised by study teams made up of analysts specialized in various asset classes and sectors.
Calculate the time of redemption
When you decide to withdraw from the fund, there will be talk of “redemption” of your fees. At this time, you will be able to know if you won or lost with your investment. For this, compare the quota value of the day you started the investment with your value on the day of the redemption. If on the day of the ransom the difference is positive, you will have won; if it is negative, you will have lost. It’s that simple.