Fund Basics
What is a mutual fund?
Mutual funds are professionally managed investment schemes that pool the money of investors together to invest into equities, bonds, and currencies. Mutual funds is one of the cost effective and simple ways to access global equity and bond markets.
For instance, with as little as HK$20,000, you can invest in a global equity mutual fund that invest in a basket of 50 or more stocks, providing you access to investments around the world and maximum diversification.
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What are the advantages of investing in mutual funds?
Mutual funds offer individual investors a simple and effective way to invest and build wealth over time. Key benefits include:
• Access to investment opportunities worldwide Investors very often find it difficult to benefit from investment opportunities outside of Hong Kong due to lack of information, time and market access, and high transaction cost. Through mutual funds, an investor can access these overseas investment opportunities with one simple investment of as little as HK$20,000, for example.
• Professional Management Mutual funds are managed by professional fund managers who are required to invest in the best interests of investors and manage risk according to the mutual fund’s investment objective.
• Risk diversification As each mutual fund invests in an average of 50 or more securities, it offers investors instant diversified portfolio, that is, the gain of one investment can be used to offset any loss in another.
• High liquidity and simple maintenance Like stocks, most mutual funds are traded and can be bought and sold daily, providing easy access to your money. Many fund managers offer daily price quotation on newspapers and through their distributors, making it very easy to track your investments.
What types of mutual funds suit me?
Currently, there are over 2,000 mutual funds that are authorized for sale to the public in Hong Kong by the Securities and Futures Commission. This includes a broad spectrum of mutual funds that have different risk return objectives.
In general, these are the types of mutual funds and their relevant risk. The higher the return potential, normally the higher the risks involved. Investors are advised to consult with your professional investment adviser when considering which mutual funds best suit your personal circumstances.
What are the risks involved?
Investing in mutual funds, like other investments, involves risk. Risk could be loss in monetary terms, or potential returns unable to beat inflation, or not meeting its investment objectives or potential returns not meeting a particular benchmark. Risk and return varies, depending on the type of fund.
How do I make money from mutual funds investments?
An investor can make money from mutual funds through:
• Capital gainsAppreciation in value of the underlying stock or bond investments
• Dividend incomeFund managers may, depending on the objective of the mutual funds, distribute income earned by the underlying investments. Some funds, especially bond and income funds, pay regular dividends.
What should be considered when buying mutual funds?
Personal situation and financial needs should be considered including the following aspects:
• Your investment goal Investment goal means what kind of potential returns you are looking for through the investments and how long you expect the investments to generate that potential returns.
• Your risk toleranceRisk tolerance is very often determined by how soon the invested money is needed for spending and what the consequences are if the investment declines in value due to risk.
• Your investment horizon Your investment time horizon is the length of time until you need to sell your investment.
What is the ideal timeframe for mutual fund investment?
Mutual funds are generally long-term investments, and by that, we mean at least three to five years is usually recommended depending on the fund's investment objectives. This is because investment funds offer diversification of risk via a portfolio of stocks; as such, it will take time for the portfolio to produce a return. Besides, performance of the fund’s underlying assets may be affected by economic cycles. Mutual funds, therefore, are inefficient for short-term trading.
Is it complicated to buy mutual funds?
Most mutual funds in Hong Kong are traded on a daily basis. Investors can buy and sell by placing their instructions with their advisers.
• Buy - Investor places an order to buy a particular amount of a mutual fund. - The buy order is normally executed on the same day and invested into the relative mutual funds immediately based on the day's closing price of the mutual fund. - Fund manager issues a contract note detailing the number of units bought, purchase price, and total purchase amount.
• Sell - Investor places a sell order to redeem part or all of his holdings in a mutual fund. - Fund manager sells that relevant number of units at the closing price of that day. - Redemption proceeds are normally sent within one week from order date. - Fund manager issues a contract note detailing the number of units sold, redemption price, and total settlement amount.
Important Note: The above is strictly for information purposes only and should not be considered as an offer, or solicitation, to deal in any of the investments mentioned herein. Some information contained here is provided/sourced by information providers or it is being re-transmitted in the ordinary course of business to you for information and reference purposes only. Manulife endeavors to ensure the accuracy and reliability of the information provided but do not guarantee its accuracy or reliability and accept no liability (whether in tort or contract or otherwise) for any loss or damage arising from any inaccuracies or omission. Some of the information in this document may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Manulife reserves the right to make changes and corrections to its opinions expressed in this document at any time, without notice. Any unauthorised disclosure, use or dissemination, either whole or partial, of this document is prohibited and this document is not to be reproduced, copied, made available to others.
Investment involves risks. Fund prices may go down as well as up. Past performance figures shown are not indicative of future performance. Please refer to the prospectus for further details including the risk factors, charges and features of the product. Investor has his/her own personal investment objectives and investment products may not be suitable for everyone. Investor should not solely rely on this website to make any decision to invest in an investment product and should seek independent professional advice if necessary.
This material has not been reviewed by the Securities and Futures Commission (SFC).
Issued by Manulife Asset Management (Hong Kong) Limited