How To make money on Mutual Funds
Mutual funds , or mutual funds, are a popular collective investment tool . They are often advised to beginners to start with something relatively simple and stable. We understand what are the features of this tool , how to choose the right shares and how to earn money on them.
How mutual funds are arranged
A mutual fund raises money from investors in exchange for shares. Each share is a share in the assets of the fund. The more shares a particular investor has, the larger his share.
The fund's assets are managed by a management company (MC), which distributes investors' money among various financial instruments. She invests them in stocks , bonds , currencies, real estate, precious metals. The activities of the UK are regulated by law, which protects the interests of investors. Shareholders pay a certain commission to the management company in addition to the price of the share. As a rule, once a month, the management company takes some part of the funds from the fund as a reward.
At the same time, the management company regularly redistributes investments in such a way as to diversify the risks of the portfolio as much as possible . The more income her investment brings, the greater the price of a share for the purchase. And those who have already purchased shares earn the more. The same management company can work with several funds at once, helping shareholders to receive income from investments.
The intermediary between the investor and the MC is a specialized depository , which controls the activities of the MC, keeps records, approves or rejects transactions.
How to buy shares and earn income from them
Fund units are not directly traded on the stock exchange or are placed with certain restrictions for purchase. Therefore, they are usually purchased through a management company, a broker or its partner bank - for example, Alfa-Bank. This can be done at the company's office or on the website.
Before buying mutual funds , it is useful to study the rules of trust management (PDU). This is a document that guides the management company. Once in the fund, money or other assets become the shared property of all shareholders who have equal rights. The exception is the so-called anchor shareholders: these are large investors who invest a large amount and get the right to adjust the PDU in their own interests. In this case, the MC creates a separate fund for such an investor, where all the shares belong to him.
You can't just withdraw your funds from the fund. To exchange them for money, you can:
Sell them to another investor - if the PDUs allow it. Often, funds have restrictions on the sale of units: for example, if units are only allowed to be purchased by qualified investors. You can sell shares at market value - the one at which they are actually traded on the market.
Apply for share redemption. In this case, the management company will transfer to the shareholder an amount equivalent to the current, and not the market value of the shares, that is, it will not work to make money on the sale.
While the shareholder owns the shares, he receives a part of the profit from the investment from the management company. There are no guaranteed indicators here, but you can focus on the fund's reporting for several years and the effectiveness of the management company in managing other funds. Profit also depends on the set of assets in which the company invests. For example, in real estate, income is quite stable, but the entry threshold for buying such shares is higher than for others. However, you can still lose your money if an unforeseen crisis occurs in one or more industries.
Alfa Investments helps investors earn on mutual funds with proven management companies and stable returns. We will help you open a brokerage account, deal with basic instruments and get a tax deduction on investment income.