Introduction to Characteristic of Mutual Funds
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Based on the characteristics, mutual funds can be classified as follows :
> Open Mutual Funds
Open mutual funds are mutual funds that can be resold to the Company's Investment Management who published it without going through the stock exchange trading mechanism. Selling price is usually equal to the net assets value. Most of the current mutual fund is an open fund.
This ETF is a mutual fund is a combination of closed mutual funds and open mutual funds, and ETF is usually a reference to an index mutual fund shares.
ETF's are more efficient than conventional mutual funds as we know it today, where mutual funds continually issue new units every day and bought back by the holders of units (investment manager must be sell the securities which are assets of mutual funds to meet its obligations to purchase units sold, while the ETF units are traded directly on the exchange every day (like a closed mutual funds, which can not be resold to the investment manager).
Mutual funds that invest at least 80% of managed funds (assets) in the form of obligation securities.
> Mutual Fund Shares
Mutual funds that invest at least 80% of funds under management in equity securities.
> Mixed Mutual Funds
Mutual funds that have a ratio of the target asset allocation of stocks and fixed income securities that can not be categorized into three other mutual funds.
> Managed by a professional management
Management of a portfolio of mutual funds held by the Investment Manager who specialized expertise in fund management. Investment Manager role is very important, because individual Investors generally have a limited time, so it can not conduct research directly in analyzing the effects of price and access to capital markets information.
Based on the characteristics, mutual funds can be classified as follows :
Open mutual funds are mutual funds that can be resold to the Company's Investment Management who published it without going through the stock exchange trading mechanism. Selling price is usually equal to the net assets value. Most of the current mutual fund is an open fund.
> Closed Mutual Funds
Closed mutual Funds are mutual funds that can not be sold to an investment management company that published it. Closed mutual funds can only be resold to other investors through trading on the Stock Exchange mechanism. Selling price can be above or below the net assets value.> Exchange Traded Fund
Exchange traded fund (ETF) is a mutual fund is an innovation in the mutual fund industry that are similar to a public company in which the unit shares can be traded on the stock.This ETF is a mutual fund is a combination of closed mutual funds and open mutual funds, and ETF is usually a reference to an index mutual fund shares.
ETF's are more efficient than conventional mutual funds as we know it today, where mutual funds continually issue new units every day and bought back by the holders of units (investment manager must be sell the securities which are assets of mutual funds to meet its obligations to purchase units sold, while the ETF units are traded directly on the exchange every day (like a closed mutual funds, which can not be resold to the investment manager).
Types of Mutual Funds
> Fixed Income Mutual FundsMutual funds that invest at least 80% of managed funds (assets) in the form of obligation securities.
> Mutual Fund Shares
Mutual funds that invest at least 80% of funds under management in equity securities.
> Mixed Mutual Funds
Mutual funds that have a ratio of the target asset allocation of stocks and fixed income securities that can not be categorized into three other mutual funds.
> Money Market Mutual Funds
Mutual funds that invest planted in obligation securities with maturities of less than one year.Net Asset Value
NAV (Net Asset Value) is one of the benchmarks in monitoring the outcome of a mutual funds. NAV per participation unit is a fair price of a mutual funds portfolio after deducting operating expenses and then divided by the number of shares / units that have been circulating (investor owned) at that time.
Benefits of Mutual Funds
Mutual funds have several benefits that make it one of the attractive investment alternatives, include :> Managed by a professional management
Management of a portfolio of mutual funds held by the Investment Manager who specialized expertise in fund management. Investment Manager role is very important, because individual Investors generally have a limited time, so it can not conduct research directly in analyzing the effects of price and access to capital markets information.
> Diversification of investments
Diversification or spread of investments realized in the portfolio will reduce risk (but not eliminate), because the funds or assets invested in mutual funds so that the effects of various types of risks were too scattered. In other words, the risk is not as big a risk when buying one or two kinds of individual stocks or securities.> Transparency of information
Mutual funds are required to provide information on the development of its portfolio and it costs continuously so that Unit holders can monitor the benefits, costs, and risks of each time. Manager of Mutual Fund shall announce the Net Asset Value (NAV) every day in newspapers and publish semiannual financial statements and annual and a regular prospectus so that investors can invest on a regular basis to monitor progress.> High liquidity
Investments made in order to succeed, every investment instrument must have a fairly high level of liquidity. Thus, Investor can melt their Participation Unit at any time according to provisions made each mutual fund investors, making it easier to manage its cash. Open mutual funds shall buy back the Participating Unit, so it is mean highly liquid. (*)> Low Cost
Because mutual fund is a pool of funds from many investors and then managed in a professional, then in line with the magnitude of the ability to make these investments will also generate transaction cost efficiency. Transaction costs will be lower than if individual investors make transactions in the stock itself.
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