We have heard the stories of global economic crisis and still hearing. We have also heard how the fall in commodity prices set emerging market economies, which Nigeria is technically included, running amok. But again, we have been experiencing the financial crisis rocking the country and how consumer spending have been on the ride of free fall.
The sum of all these is that ?cash crunch?, as a language and condition, has ruled over the majority, even government for failure to invest. Findings have shown that the majority have one source of income and/or the aggregate of the sources of income on the average is still not sufficient. Sometimes, it is a case of ?Penny Wise.??Penny Wise? is not about how big the income is, but about how effectively the little income is utilised. Of course, one of the avenues for practical application of the penny wise philosophy is Mutual Fund investments.
Many, for sure, have heard about Mutual Fund, but how much do the ?many? know about it. Granted, there used to be days when investment opportunities, particularly in the fixed income segment, were shrouded in ambiguities. Although many are still there today, the sunny side of it is that there are knowledgeable investment advisers now. We do well to look for one. Investments in key fixed income securities have emerged the veritable source of that extra factor for income mobilisation.
Variants of Mutual Fund
This form of MF offers holders the benefit of a diversified portfolio of securities that cuts across the different asset classes and recommended for investors looking for growth without taking too much risk. These funds are also partly affected by fluctuations of share prices in the stock markets.
The pooled Funds are invested in Federal Government Bonds, Corporate Bonds and high quality money market securities. These funds are not affected by the fluctuations in the equity markets. However opportunities of capital appreciation are also limited in such funds.
This involves investment in quoted equities that are traded on the NSE and can achieve high returns over short and long-term periods. Equity schemes are suitable for investors having a long-term outlook, which seeks appreciation over a period of time, but could be affected by fluctuations of stock prices.
Money Market Fund:
The Mutual Fund is here invested in high quality money market instruments like Treasury Bills and Certificates, Commercial Papers and Banker?s Acceptance. They are also income funds and provide easy liquidity, preservation of capital and moderate income. Such funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods of time. Banks are major participants in this segment.
Other types of mutual fund include the aggressive growth fund, asset allocation fund, blend fund, capital appreciation fund, clone fund, closed fund, crossover fund, fund of funds, global fund, growth fund, growth and income fund, hedge fund, income fund, index fund, international fund, municipal bond fund, prime rate fund, regional fund, sector fund, specialty fund, stock fund, and tax-free bond fund.
The mutual fund share classes provide a quick way to determine how fees are to be paid, allowing an investor the ability to determine if the fund is a fit for their portfolio at a glance.
Features and Benefits
Some Mutual Fund managers accept a minimum investment of N10,000 and multiples of N5,000 thereafter. This helps to actualise the philosophy of penny wise earlier mentioned, as many would wish away the rationale for an investment worth N5,000 and N10,000.There is easy entry and easy exit; quick redemption on maturity (within five days); tax exemption on dividend payout; and availability of experts, management and professional advice by the Fund Manager.
Of course, there are mutual fund portfolios designed to hopefully produce large capital gains by investing in up and coming or small companies. As good as the ideas are, these types of investments are risky because the future of these small companies is unclear and may end up failing or yielding no real capital. A professional fund manager is expected to be on top of the situation, with a list of predictable investments.
There is also cases of insider abuse, which is unacceptable practice, where traders buy and sell mutual funds in an attempt to make short-term profit from the differences in each day?s closing prices.
Wisdom, they say, is ?crying out on the streets? and only takes discernment and willpower to listen to it. Start now to make the move for the next Mutual Fund investment opportunities. Remember, the boom-bust cycle is a perpetual flux that touches its points along the cycle at one time or the other. It is only with right decisions ahead of time that one can be successful at each point. Think Mutual Fund, act it now.