What are Mutual Funds?

Government of Pakistan is laying special importance on promotion of mutual funds as to cater financial services to the saver profile of Pakistan. Mutual Funds reduces the risks which a layman can run by investing into non profitable fund. Mutual funds in Pakistan, Mutual funds industry, asset management companies, NIT Pakistan

Investment Options in Pakistan

Risk free government saving options offers 10% p.a on average returns to the saver profiles of Pakistan, however, mutual funds gives an opportunity to earn around 20%p.a returns with diversification handled by financial experts.

Categories of Mutual Funds
 

Open Ended Funds are open to additional investment from the market and open-ended fund manager can issue more funds depending the demand, whereas, close-ended funds are held by specific group of people and additional units cannot be issued.

Income Vs Growth Funds
 

Growth funds also termed as equity funds. Volatility in growth funds is considered to be on the lower side, as the aim is to build portfolio in a longer run.  On the other hand, income funds pay regular dividends and are placed in short term financial instruments carefully in order to build positive yield.

Capital Gain/loss
 

             Capital Gain/Loss= Buying Price-Selling Price

Dividend

90% of the earned income is being distributed to unit holders as enforced by law. Dividends are usually paid according to company policy of profit distribution

Yield Calculation:-

Yield= Dividend + capital gain

Investment Strategies

Although there are many strategies defined according to the profile of the customer, one of the most popular ones is rupee cost averaging

Calculation of NAV (Net Asset Value)
 

Net Asset Value (NAV) is being calculated by obtaining the current value of assets divided by outstanding units of the fund. Usually, the fund sets buying and selling price in order to obtain a difference for Management Expense Ratio, which hovers between 1.5-2.0%