There are thousands of mutual funds or unit trusts in the market. They are not the same. Though the funds are sold by the same company. There are funds designated to outperform the index, mimicking the index, sectoral funds and others. Thus, it is very important for you to know your investment objective and also your risk profile.
Investing in mutual fund is not only about making 50% return per year. It is about matching your investment objective and risk profile, thus if you can gain even 5%-7% and it is consistent gain annually for 30 years, it is a good investment if you are a low risk investor.
But if you’re searching for 50% return in 2007 but a year later the fund only gives you -10%, and you’re not that savvy investor, I don’t think you have made a correct decision. To make the situation worse, the fund is for your retirement!
Here is a general types of mutual funds that are available in the market:
1. Equity Funds
The most common funds that will become the hottest in town when they are making 75% return in a year! Basically this type of fund will invest in stocks & equities but among the equity funds itself, they’re also differences. The risks are not the same. There are equity fund which invest for:
- Company dividends
- Company potential growth
- Small Capital company
- Value Investing
- Big capital company
and many more.
2. Bond Funds
Invest largely in the bond market, particularly in the bond issued by the government and big corporations. Bond funds generally known as a conservative type of investment without the potential for growth and high returns.
3. Index Funds
Index funds are equity funds that allocate their assets in any index components, like the Kuala Lumpur Composite Index, Dow Jones, S&P and others. The strategy behind the funds is very simple, follow the particular index. Your investment won’t outperform the index nor do worse than the index.
4. Hybrid Funds
Balance. That is the keyword. The fund manager will allocate some amount of fund in the bond market for safety reason and invest the other parts in the equity. Among the strategies of hybrid funds is to put the money in the equity in the bull market and retreat to bond market when the market in bear situations.
5. Money Market Funds
Money market funds invest in money market securities which are sold by financial companies in a variety of denominations and by the government. The investment in money market securities is usually on for short periods. In other words, money market funds is like your savings account in the bank but it give you better return, but remember, money market funds is not insured like your savings account.
6. Industry / Sectoral Funds
The fund invest specifically in certain industry such as industries sector, banking, technology, consumer, energy, and others. If you’re working in one of the industries this fund may suitable for you.
7. Syariah Funds
In Malaysia, Syariah funds also have different types. Basically syariah funds can be categorized into funds which are invest largely in equity, bonds, index that has been approved as a halal investment.
Happy investing.
3 Comments
hohohohoho.. saya ada melabur dalam mutual fund kat public bank.. tak pergi check lagi berapa price market hari ini..
performance fund ok?
Unfortunately convenience and the perception that some genius is going to invest their money wisely and make them rich at retirement are their reasons for investing in mutual funds. The fact is of course that management fees and poor management decisions usually make the returns mediocre at best and seldom beat inflation over the long haul. The perception of growth is just that, perception. The way CPI figures are manipulated the poor investor doesn’t realize until its too late that he could have put a list of stocks on a dart board and done better. And dollar cost averaging, well that’s another myth. There are some funds able to show good returns over short periods but the bigger they are the harder it is for them to exit during dowenturns.
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