Investing in mutual funds - where to start? Mutual fund (puff oh-oh-oh) - the main disadvantage or how they lose money in mutual funds Is it worth buying PIFs.
How to invest in a mutual fund? How to choose the right mutual fund and management company? What strategy for investing in mutual funds will be successful? Despite the abundance of information and the twenty-year history of the development of mutual funds in our country, interest in this topic is not waning. Mutual funds have been and remain an actively used investment tool for a wide range of individuals due to their availability, simplicity and a good ratio of profitability and risk.
How to invest in a mutual fund: an investor's memo
The economic essence, advantages of mutual funds, their types and mechanism of operation were discussed in detail in the article What is a mutual fund . Therefore, we will immediately move on to the algorithm of actions and advice to a potential investor.
Estimate the investment amount
The choice of the type of fund depends on it. When small amount planned investments (up to 50 thousand rubles), only an open unit investment fund is suitable for you. Starting from 100–150 thousand rubles, you can pay attention to interval funds. Access to closed-end mutual funds, as a rule, starts from 0.5-1 million rubles.
Define a strategy
Choose a risk-reward ratio that is comfortable for you. The higher the yield, the greater the risk. Experts conventionally combine all the variety of strategies into groups: conservative, moderate, aggressive.
Let's make a reservation right away that it makes no sense for overly cautious investors to act through mutual funds due to the additional financial costs of the investor with the same degree of risk (management costs, commissions for buying and selling). Also, for example:
- shares of government bonds are less profitable than the bonds themselves (the coupon for which is not taxed);
- and shares of the banking market are less profitable than deposits, the income on which is not taxed “de facto” (only if the refinancing rate is exceeded by 5%).
Everyone else will have a wide range of financial assets, from which it will not be difficult to form a portfolio. Many management companies offer a choice of a ready-made range of funds for qualified investors and ordinary people, the most popular of which are: corporate bonds, stocks, mixed investments, index funds, rent and credit funds.
Invest for long periods
Remember, mutual funds are not suitable for short-term speculative games. Invest for long periods in anticipation of investment rather than speculative returns. According to statistics, deposits in mutual funds for a period of less than a year are not economically justified. The optimal period is 2 years. For equity funds, it is preferable to wait one complete economic cycle: 3-5 years.
Diversify your investments
- Type investment assets(ratio of profitability and risk).
- According to the branch of paper.
Good choice for novice investors: high yield stock fund (30%), index fund(30%), bond fund (40%).
Determine the type of funds
After deciding on a strategy, choose the types and categories of funds that are right for you. This will narrow the range of choice and cut off obviously unnecessary players.
Analyze and select management companies and funds
The choice of a mutual fund is the most crucial step. The evaluation criteria are discussed below. Try to select several potential management companies at once, each of which manages the activities of several funds different types... If necessary, this will allow the exchange of shares without tax consequences and, thus, respond to market conditions, minimize risks and fix profits. In addition, in this way you will incur a minimum of costs (no commission costs, only a constant fee for the management company).
Examine the docs
Study the main documents most carefully: the rules of trust management (PDU), the investment declaration of the mutual fund (for acceptable investment assets) and the contract (for financial conditions and problems in the future).
Calculate indirect costs
Calculate the entire spectrum financial costs that will put an additional burden on you. These are issuance surcharges and redemption discounts. They may depend on the amount of the transaction and the holding period of the shares. Be sure to check the percentage of management costs charged to the entire fund and deducted annually from the fund. net assets... Keep in mind that funds declare their profitability minus management costs. Therefore, when analyzing profitability, you can ignore them.
Clarify the terms of exchange
Since sooner or later you will have a desire to make changes to the structure of your portfolio, it is fundamentally important that when exchanging units within the same management company, you are not charged any commission.
Specify the possibility of selling on the secondary market
Public units have good liquidity. But for holders of units of interval and closed-end unit investment funds, the opportunity to sell their securities on the secondary market (to banks, financial companies, other shareholders) is of decisive importance. Otherwise, there is a great risk of being left with nothing.
Sign a contract
Execute an agreement, open a personal account and request an extract from the register of depositors. At the same time, buy shares directly from the management company, bypassing agents (who take their interest for services). Do not forget, you have the option of investing money in mutual funds through an Individual Investment Account (IIS). That's all. Not that hard, right?
How to choose a mutual fund: evaluation criteria
How to choose a mutual fund for investment? The necessary information for evaluating mutual investment funds and management companies can be obtained via the Internet at a number of useful resources:
- www.fcsm.ru - Service of the Bank of Russia. Make sure that the fund of your choice is registered in the registry.
- www.ra-national.ru - National Rating Agency... Check the reliability rating.
- www.investfunds.ru - analyze the history of financial indicators, read analytical reviews and news.
- www.nlu.ru - National League of Governors.
- www.prodengi.ru - site of a specialized depository, promptly informs about the situation on the market.
What criteria should be used to evaluate and select a fund and its AMC?
Term of "life"
Indirectly indicates reliability and, most importantly, makes it possible to analyze financial indicators in dynamics.
Founder
Funds under the auspices of large FIGs are distinguished by stability, safety and greater agility in the market due to significant injections from outside.
Reliability rating
The following classification of companies and funds has been adopted according to the degree of their reliability:
- A, A +, A ++ - high, very high, maximum;
- B, B +, B ++ - low, low, satisfactory;
- C, C +, C ++ - unsatisfactory;
- D - category "default".
The current individual rating of the MC reliability is presented on the website raexpert.ru. According to it, about 15 companies have the maximum rating, which gives you a lot of room to maneuver.
Adequacy of equity capital
It guarantees the stability of the management company itself, as well as the ability to compensate for unforeseen losses from its own funds.
Net assets
The most important indicator. Reflects the efficiency of work, the degree of risk and the ability to maneuver in the investment market.
№ | Mutual fund | Category | Of the Criminal Code | NAV | Share of NAV in management |
---|---|---|---|---|---|
1 |
Raiffeisen - Bonds |
bonds | Raiffeisen Capital | 19 997 773 682.36 | 10.50% |
2 | Sberbank - Prospective Bond Fund | bonds | Sberbank Asset Management | 17 446 390 941.14 | 9.16% |
3 | Gazprombank - Bonds plus | bonds | Gazprombank - Asset Management | 16 066 648 844.61 | 8.43% |
4 |
Alfa-Capital Bonds plus |
bonds |
Alpha Capital |
12 226 084 018.44 | 6.42% |
5 |
Sberbank - Bond Fund Ilya Muromets |
bonds |
Sberbank Asset Management |
10 209 934 009.52 | 5.36% |
6 |
Alfa Capital Reserve |
bonds |
Alpha Capital |
7 702 930 966.2 | 4.04% |
7 | Spare | bonds | System Capital | 5 635 235 668.09 | 2.96% |
8 | URALSIB Growth shares | promotions | 5 358 374 370 | 2.81% | |
9 |
Ruble bonds |
bonds | 4 362 701 450.31 | 2.29% | |
10 |
VTB - Treasury Fund |
bonds | VTB Capital Asset Management | 3 866 761 537.19 | 2.03% |
So, the same "Uralsib Energy Perspective" for three years brought its investors 196%, being in the honorable third place.
Rule 2. Don't rely on intuition or some abstract figures of profitability. Effectiveness is assessed using ratios showing the ratio of return and risk.
Rule 3. Choose the fund that is regularly included in the TOP according to the criterion of reliability and at the same time brings its investors, if not the maximum, but stable profit.
What to do next: behavioral strategies
Having invested money in a mutual fund for the first time, many novice investors are wondering what to do next?
Behavior model 1. Passive behavior.
The bottom line: do nothing.
Oddly enough, a strategy very often brings success over a long period if the fund is chosen correctly. Investment yield the market and competent traders will do everything for you.
Behavior model 2. Fixing short-term profits.
The bottom line: to sell the shares of the fund after the first rise in prices.
The tactics are justified only when dealing with underlying assets (shares), but not shares. Disadvantages: high costs of purchase and sale operations, limited ability to re-invest, loss to the market in the medium term (3-5 years).
Example: a depositor purchased shares at a price of 1,000 rubles. and recorded a profit after the rise of the market and selling at 1200 rubles. Additionally, I lost 1.5% on purchases (markups) and 3% on redemption (discounts), and also paid income tax (13%). After all the operations, the market price increased to 1400 rubles. What should a depositor do?
Behavior model 3. Additional buying when the market falls.
Essence: buy additional fund units when prices fall (downward correction).
The tactics almost always pay off in a calm market situation. Disadvantages: large loss of profits in a situation of stable bullish trend (fast growing market).
Behavior model 4. Additional purchase regardless of the market situation.
Essence: to buy additional shares at a certain frequency (once every six months, a year). Averaging tactics are versatile and viable, but only in the long run.
Behavior model 5. Exchange of assets.
The bottom line is to keep money in a stock or index fund in the growth stage and exchange it for a bond fund in the fall stage. This tactic is well suited to experienced investors as market fluctuations are difficult to predict.
Instead of a conclusion
Should you invest in mutual funds? Worth it. The main thing is to correctly assess your capabilities. If you are good at investing, try to use not only a passive, but also an active way of earning:
- study literature on investing, fundamental analysis and valuation;
- analyze the current state of the markets and their development prospects;
- choose the right moments for buying and selling shares;
- buy shares after the market falls (the probability of a correction in this situation is high);
- actively use the opportunity to exchange shares of one investment asset for another
And do not forget that mutual funds in Russia are attractive, but not the only investment instrument. The pros and cons of mutual funds are obvious. But there is also a close alternative to mutual funds.
Trust management. The method has a number of advantages and disadvantages over traditional mutual funds, primarily due to the possibility of maximum focus on the interests of the investor and targeted investment. On the other hand, trust management should be attributed to the class of elite services, since the threshold for entering the market is quite high. In addition, the trust agreement is required to be reviewed every year, and the owners of the assets pay taxes on a regular basis. Finally, trustees do not always outperform mutual funds in terms of profitability.
General Funds Banking Department(OFBU). The bank acts in the role of the management company. Such an organization provides several advantages: the ability to effectively use the banking infrastructure, good reliability and transparency. Mutual fund or OFBU? The latter have good prospects, but at the moment they cannot compete with mutual funds in terms of reliability and profitability. The cornerstone is the issue of having professional managers and traders.
Structural products. What is it and can you make money on it? ETF (Exchange Traded Fund) - a new type valuable papers traded on the exchange. It is simply an already assembled balanced portfolio of assets of different issuers, for the purposes of availability, divided into small parts. Example: The S&P 500 index accumulates the stocks of the 500 largest US companies. You can purchase a “slice” of this index in the form of an ETF. The instrument is rapidly developing abroad and has good prospects in our country. For seasoned investors, ETFs are a preferable investment method than investment units, since it is devoid of their shortcomings (restrictions on the choice of assets, high commissions).
Do not be afraid of the market, engage in self-development - and you will succeed.
Safe investment!
Useful videos
Mutual funds are an excellent alternative to direct investment in stock market- allow you to earn about the same, but all the work on capital management falls on the shoulders of professional managers. It is clear that their results will be better than that of a novice investor, and they have more tools to form a more balanced portfolio.
Formally, a share is a reflection of the totality of all assets under the management of the fund, but in itself it is a security. And it should be purchased according to certain rules. Below are some tips on how to properly invest in mutual funds.
Diversify your investments
One might get the impression that, due to the large number of issuers, the fund's assets are diversified quite well. However, this is not quite true. The fact is that each mutual fund follows a certain strategy. For example, the basis of the UIF VTB - the Consumer Sector Fund is made up of shares of companies oriented towards the retail consumer (mainly retailers), and the UIF Financial Sector of Sberbank relies on shares of the largest banks and the Moscow Exchange.
Where there is one industry, there are always risks. For example, in 2015, retailers' shares fell sharply in price due to a decrease in profits, and with them the profitability of corresponding mutual funds. The same fate befell funds holding shares in oil and energy companies.
You should not purchase shares of exclusively super-profitable mutual funds - it is quite possible that the growth in value was provoked economic factors rather than through good governance and sufficient diversification. Likewise, foreign exchange mutual funds are not a panacea. If the ruble strengthens, the fund shares will grow in foreign currency, but fall in price in rubles.
The ideal option is to create a diversified portfolio of units of 7-10 mutual funds of various types.
- 5 mutual funds following a conservative strategy (with a low level of risk), for example, bond or Eurobond mutual funds;
- 3 mutual funds with a medium level of risk, for example, mixed investment mutual funds, precious metals, real estate or balanced (equities and bonds in equal proportions);
- 2 mutual funds with high profitability - equity mutual funds.
As a result, it will be possible to collect a portfolio that grows or does not lose value in the face of various economic upheavals.
In a crisis, the portfolio should be based on mutual funds with a small but guaranteed return - for example, bond funds or mixed funds (where shares and bonds are 50/50).
In this case, you will definitely receive income and you will not end the year with a minus. If good prospects open up on the market, then, on the contrary, one should take risks and buy shares of highly profitable mutual funds.
An excellent example of a fund suitable for investment in a crisis - Ilya Muromets from Sberbank
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Hedge risks
The advice follows directly from the previous one. Strive to cover as many industries and various financial instruments as possible within one portfolio. For example, you can insure against the weakening of the ruble by purchasing units of mutual funds issued in another currency.
You can save yourself from instability in the stock market by buying securities of mutual funds investing in gold or real estate - during crises, these assets do not fall in price so much (or even rise in price as the most reliable assets).
For an additional guarantee, purchase units of mutual funds that will grow against each other.
Then, if one position weakens, the other will grow in any case. For example, it has been noticed that mutual funds of precious metals and funds investing in US securities are growing against each other.
The past is not an indicator
Remember that past returns do not guarantee similar returns in the future. Moreover, an upturn is often followed by a recession, and if any industry has grown this year, a correction may be expected next year. The only exception is, perhaps, bond mutual funds - they invest in low-risk assets with almost guaranteed returns.
The net asset value is not an indicator for assessing the profitability and reliability of a mutual fund. The NAV only expresses the hopes of investors and reflects the number of funds at the disposal of the fund. If people trust the mutual fund and buy up its shares, the NAV grows.
Studying past performance is not the most reliable criterion for choosing a fund
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Reporting and ratios are important
Fund profitability should not be determined by charts only. This is nothing more than an advertisement. You should analyze the mutual fund in more depth, especially if you want to invest large funds in it. What parameters can be used to evaluate:
- Assets composition. Think about whether they will rise in price in the near future, whether there are a lot of junk or overvalued assets in the instruments, whether there will be an adjustment for the exchange rate difference.
- Last year report. Reflects not only the dynamics of the value of the share, but also the portfolio. It helps to understand in which direction the fund is moving: an increase in assets or a decrease in them, whether there is a bias in favor of some issuers.
- Odds. The most important - Alpha - shows the efficiency of the manager's work, Beta, which demonstrates the relationship between the profitability of the mutual fund and the state of the market, Sortino, which allows assessing the profitability / risk. These data can be calculated by yourself or taken from ready-made reports.
- The personality of the manager and the composition of the team. Experience, the number of funds managed by the team, and work efficiency are important here.
Of course, you don't have to bother and buy shares of those funds that show stable growth from year to year, or are significantly ahead of the benchmark. However, for a balanced decision, it is recommended to better study the selected mutual fund.
Have money in reserve
This is important in order to be able to buy additional shares when they become cheaper.
Many novice investors make a key mistake: they buy securities of the most profitable funds when they are quite expensive, and when the value of a share falls, they sell it. The opposite should be done: buy at the minimum and sell after reaching the target level.
Therefore, experienced shareholders always have a certain amount of money in reserve, and if the shares become cheaper, they do not dump them, but buy in addition. As a result, when the value of the share rises, the income covers any possible drawdowns.
The main rule of the investor
The advice is as old as the world, but few people follow it. A share is the same paper as a stock and a bond. If you buy shares at the peak of their value, then as a result, the investor may suffer temporary losses. Better wait until the price will fall- and for the same money to buy more "pieces of mutual fund".
Everyone determines the time of sale for himself, but it is best to perform the operation at the peak of cost. That's right: in the case of mutual funds, the law “Buy cheaper, sell more expensive” works.
The main rule of an investor is to rest on the bottom, sell on the top, and works with mutual funds.
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Do not buy shares of "fashionable" mutual funds
Management companies like to show only a good picture and therefore actively promote the most profitable funds. But a successful year can be replaced by an unsuccessful one, so the composition of assets and reporting should be analyzed.
Be wary of purchasing shares of aggressively promoted young mutual funds that do not have a positive history of profitability. Often, management companies advertise them in order to quickly increase a sufficient amount of NAV.
Approach "fashionable" mutual funds pragmatically: if for a year the fund has not been able to conquer the yield of 5-10% per annum, then perhaps all the talk about the future "takeoff" is worthless?
Keep shares for at least 3 years
This is important for several reasons:
- Firstly, during this time any fund, even a high-risk one, will show positive dynamics.
- Secondly, many funds do not charge a commission when redeeming a long-term unit.
- Third, you will be able to receive a tax deduction.
Its size is set as the product of 3 million rubles by the number of whole years when the share was with the owner. For example, if you have held shares for 5 years, you will be able to claim a deduction of 15 million rubles.
For an average investor who invests tens or even hundreds of thousands of rubles, such deductions are enough to avoid paying taxes at all.
Otherwise, upon redemption of the share, you will have to pay tax - 13% of the profit if you live in Russia, and 30% if you do not tax resident our country. Profit is calculated as the value of the canceled share minus the costs of its acquisition (purchase price + commissions).
Long-term ownership of the fund shares will bring you additional income in the form of tax savings
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Please note that the application for tax benefits is submitted to the management company, not the Federal Tax Service (according to rbc.ru)
Since 2014, any investor who has held shares in the fund for three years or more has the right to tax incentives from investment income (according to bcs-express.ru)
Reduce costs
Advice is a continuation of the previous paragraph. For the purchase and redemption of shares, you will have to pay a premium - a commission and a discount, respectively. You should carefully study the conditions for investing in the fund and find an opportunity to save money on this.
For example, sometimes companies charge a lower commission for a large investment. Others offer a reduced commission when buying units online. For example, VTB, it reduces the premium by 1% when purchasing securities via the Internet.
Most management companies reduce the discount for redemption of shares after 3 or 5 years of ownership. Many, like Sberbank, allow after a given period to sell shares for free.
Other ways to reduce costs:
- Do not redeem shares, but change them for others (within the framework of one management company this can be done free of charge), with a lower redemption commission;
- Sell shares cheaper than they bought to create a loss, and use it to get tax deduction at a profit;
- Transfer funds to an account opened with the same bank so as not to pay for an interbank transfer.
How exactly to reduce costs depends on the fund and the management company. If a it comes about a large amount, even 1% is significant.
Be disciplined - tactics and strategy
Regardless of what tactics and strategy you follow, follow it to the end. For example, if you set yourself the goal of increasing the amount of savings in mutual funds, then start with a small amount and systematically acquire shares (of course, when they become cheaper).
Try to form a balanced and protected from all risks portfolio within one management company.
Decide in advance with goals and deadlines. Your actions should be dedicated to them. It is not recommended to deviate from the plan. Investing is a long-term marathon, and the patient and economical rather than the quick and speculative one wins.
How to choose a mutual fund in simple words:
And finally ...
Well, in conclusion - not advice and not a rule, but rather a recommendation. Something interesting always appears in the world of mutual funds. Learn and try new things! Study legislation to be able to reduce tax base, fix the rules for buying and selling shares so as not to overpay commissions. Some brokers allow you to buy shares of "their" management companies on IIS and open interesting options with tax preferences.
Do not limit yourself to open-ended mutual funds. With serious capital, it is recommended to invest in a closed or interval fund - the interest is higher, the risk is more moderate, but there are also limitations.
As an alternative to mutual funds, you can try ETFs - these are exchange-traded funds that do not acquire assets, but a specific index or group of indices. They work the same way as mutual funds. Perhaps, to diversify your portfolio, you can also include them in your list of acquisitions.
Per last time Having visited the offices of several banks, he was faced with the active promotion of banking products called mutual funds or simple mutual funds. Employees very persistently offered to take advantage of the opportunity to invest in mutual funds and get high returns. Several times higher than the profit on bank deposits, with their very modest percentage - in the region of 5-6 per annum.
They showed various numbers, graphs of profitability and how much could have been earned if I had invested a year, 2 - 5 years ago. In fact, the data was impressive.
Dozens of percent of profit in a year or two.
And immediately there was a desire to entrust their hard-earned money and take part in the pursuit of profit.
Mutual fund profitability for 2017
An article for those who are planning, planning, or have already invested in mutual funds.
Pitfalls and the main disadvantage of investing in mutual funds in Russia.
What is interesting about mutual funds
To begin with, let's analyze (remember) - what is it? And how will it be useful for you and me?
A mutual fund can be viewed as a common pot for all investors. Money is collected and various assets (stocks, bonds) are bought with it in a certain proportion. Each investor or shareholder has a certain share or share. In proportion to the invested funds.
Pluses of Pifs:
- simplicity;
- availability;
- wide diversification.
In simple words, to invest in mutual funds, you need to conclude an agreement with a management company (MC) and deposit money. And that's all.
The cost of one share is only a few thousand rubles. Anyone can become the owner (or co-owner) of the fund and receive a return in proportion to the funds deposited.
Buying one share for 2-5 thousand rubles, you invest in tens or even hundreds of different companies. And not only in Russia, but all over the world. Want America, please. Germany, China, England or Japan. No problems.
Sounds tempting. Do you want to simultaneously invest in most countries with developed economy- easily. True, this requires a little more money... But several tens of thousands can easily be met.
You can of course do it all yourself. Anyone can conclude an agreement with a broker and companies of interest.
But this requires a lot of money. So much money. In addition, having spent more than one hour (or even several days) of your time.
In mutual funds they will do everything for you. Bought shares - received a package of the shares you need. And nothing else needs to be done.
Comparison of profitability
But don't let it reassure you high profitability... Markets are volatile. And today's profits are not guaranteed in the future. But that's not what we're talking about.
In order to understand how effectively your money is working, you need to compare the result with some kind of benchmark.
The easiest way to do this is by comparing index mutual funds. All management companies buy shares in the same proportion as they are in the index.
For example, the Sberbank-America mutual fund completely copies, which includes the 500 largest US companies.
Comparing the charts with other companies investing in a similar way reveals a curious picture.
On long-term intervals, the profitability varies greatly.
On the picture:
- Sberbank - red chart;
- Raiffeisen - green;
- exchange traded fund ETF - white.
On a scale X - percentage of profitability since the beginning of 2014.
Total Return is the final return on funds.
Annual Eq is the average annual profit.
![](https://i0.wp.com/vse-dengy.ru/wp-content/uploads/2018/02/PIF-minus.jpg)
Unit investment funds
What's the catch? Why is there such a difference in profitability? And a very significant one. Almost one and a half times!
The bank will not tell you about this. And even if they do, they will be so veiled that you will not pay attention to it as an unimportant point.
The profitability of a fund (unit investment fund) is influenced by three main factors:
- Legislation.
- Costs.
- Management strategy.
Legislation.
According to the law, part of the invested funds, the fund must keep to the cache. That is, this money is not used to buy assets. They just lie there.
When a client sells his shares, the fund pays out from this reserve. Part of your money does not work, but lies in a stash and waits for a certain Vasya Pupkin to come and demand to return his funds. The percentage of this "airbag" is small. But as a result, the real profitability of the fund itself decreases.
Commissions.
You will be charged not one, but three commissions !!! The main disadvantage of investing in mutual funds.
Moreover, employees who “talk away” potential customers do not particularly focus on this point. They speak briefly, necessarily adding the word "only ... ..".
So what are these costs?
Entrance fee. When buying shares, a certain percentage of the amount of funds or the so-called surcharge will be automatically deducted from all shareholders. It can vary from 1.5 to 4%. Depending on the appetite and impudence of the management company. On average, this is 3%.
Naturally, some of this money goes as a reward to the bank or employee “for selling the product”. That is, out of your pocket. You have not yet earned anything, but have already incurred expenses.
Is 3% a lot or a little?
Example. Let's say you have 100 thousand rubles. With this money, we bought shares of the fund. Unit investment fund for 10 years, showed an average rate of return for the year 12%. During this time, the capital would have grown to 310 thousand rubles.
So? No not like this.
Having paid a 3% commission, you actually invested not 100, but 97 thousand. And the profitability must be calculated from this amount. Under the same conditions, you would have received 300 thousand. Having lost another ten as a lost profit.
One could close our eyes to this. If it was the only commission of the management company.
Exit fee. Or the so-called discounts when selling shares. The management company buys out your shares at a discount. The percentage again depends on the appetite of the company and the terms of holding the shares. On average, 2 to 3%. Usually, no fee is charged (but not for everyone) when holding shares for more than 3 years.
What do we get?
We bought shares, lost 3%. Shares sold - lost 3% more. We invested money for 1 year. The fund earned 12% of the profit. Your net profit minus costs is only 6%.
In the ten-year period, from the example above, you lose another ten.
And one could close our eyes to this (albeit with difficulty). We can say that these were only flowers. The most interesting is ahead.
Management fee. This expense item includes the fees of the Criminal Code itself, and other costs. Summing up - we get from 3 to not modest 5-6%. This fee is fixed. And it is taken every year from the value of your assets. Regardless of whether the fund showed a profit or a loss.
Probably it would be more correct to pay the mutual fund for the shown result. Earned profit for clients - got a certain percentage. If not, then there is no need to pay.
But management companies think differently. And they pull off money from clients every year.
How does this affect our money? And on the bottom line?
With an average annual commission of 4%, if the fund earns 12%, the real return will be 8% per annum. You have lost 33% of your profits.
Putting all the costs together.
The conditions are the same. There are 100 thousand, the fund is growing at an average rate of 12% per year. Entrance fee (one-time) - 3%. Management fee (annual) - 4%.
In 10 years instead of 310 thousand, your account will have modest ... ... 210 thousand rubles.
The profit will not be 210%, but almost 2 times less, 110%.
Additional Information... In the example, we have not yet considered the possibility of obtaining losses based on the results of the operation of the mutual fund. When the annual management fee is added to the received losses again. We got a loss of 4%. We add another 4% commissions. And now the loss doubles.
Pitfalls and other hidden moments
To all of the above, you can additionally add a couple of hidden moments.
Purchase of "own" assets. This usually applies to bond funds. Bank issues debt securities... BUT Management Company, working in conjunction with the bank, invests money of investors in these "theirs". Even if it is not spelled out in the management strategy.
Everyone benefits (except for the ultimate shareholders). The bank has successfully placed securities. The management company received a certain bonus for the repurchase of assets "needed" by the bank.
Advertising brochures. In offices, they like to show various pictures (graphs and indicators of profitability) in brochures. Their meaning is about the same. When investing in a mutual fund (name of the fund) on a certain date of the year and up to …… .. a profit of 50 (100, 200%) was obtained.
Everything is simple here. A favorable period is selected, during which the fund showed the maximum profitability (a year or two, and even only a few months). And this information is “fed” to clients. See what opportunities, what profits. Everything with us is good and wonderful.
There is no full disclosure of information. Clients almost never know where the fund actually invests money. The MC provides information once a quarter. The rest of the time for ordinary shareholders, everything is shrouded in a veil of secrecy.
The main goal of the mutual fund !?
One gets the impression that the main task of mutual funds is not to make a profit?
Management companies do not want to meet potential and existing shareholders. I'm talking about the annual cost in terms of fees charged.
But with them, everything is just bad. For some reason, they are not decreasing, but increasing. Even in a highly competitive environment, among similar funds. Nobody is in a hurry to reduce the interest for management.
There is an opinion that the management company is trying to squeeze the maximum amount of money from clients.
In conclusion or alternative to mutual funds
Taking advantage of the financial illiteracy (or not strong awareness) of the population, the funds continue to lure depositors. Featuring beautiful pictures and graphics.
Telling that the whole world and especially rich people, everyone invests. And specifically, you do not need a lot of money for this. Just a few thousand. To start. But, of course, better is better.
And of course, they will definitely tell you what and where is better to invest for many years. Markets are volatile. But in the long run, everything grows.
This is partly true. But due to commissions, a person catastrophically lags behind the market for long periods of time. Losing almost half of their capital in a few years just on trading costs alone.
In the West, this has long been understood.
And one of the main factors for successful investment is low costs. For this, investors use ETFs.
The meaning is practically the same as that of mutual funds. Only with much lower annual costs.
In Russia, this market is just beginning to emerge. A little more than 10 funds are available so far. There are several thousand of them in the West.
Commissions in Russia - 0.9%. In year. And that's all. No more costs. The lowest in the country.
In the West, there are funds with annual commissions of 0.1% and even 0.02% per year. In which you can invest. But….
Many nuances can arise. Inconvenience and other related costs - translation fees, language barriers, brokerage costs, double taxation and other nuances.
At the end of the article, see a comparison of mutual funds, ETFs and the index itself, on the basis of which funds operate. Over the past few years.
A mutual investment fund (MIF) is a financial instrument that, in my opinion of an amateur, is now gaining momentum. Bank employees are beginning to vigorously vparivat offer citizens shares in various subsidiary investment funds to their employers of management companies.
People, seeing how rates on bank deposits are falling, and receiving offers from the bank to extend the deposit for a new period from interest rate significantly lower than they placed earlier, they begin to think about whether it is time for them to place their funds somewhere else.
And then there is Bank employee gives a calculation about what income a citizen would receive in 2016 if he acquired shares of one or another fund. Usually, they really show only the profitability of that fund (from the native line that showed the maximum income for 2016. And now a citizen, seeing what income he will receive in a year from a bank deposit, (and this is now around 7-9%) and that income , which he can potentially receive (most likely, a person's imagination draws tens or even hundreds of percent of profitability.) He decides to purchase units of a mutual fund and thus invest in our (or not only our) stock market.
The table below shows the statistics of the total net asset value of open-ended and interval unit investment funds in the Russian Federation for the period from 01.01.2014 to the present.
Total net asset value of open-ended mutual funds (RUB million) |
Total net asset value of interval unit investment funds (RUB mln) |
|
From the above data, you can see that since the second quarter of 2015, the value of net assets has only been growing and in two and a half years has grown by more than 100%.
Neither the strengthening of the ruble in 2016, nor the fall of the MICEX index in the first half of 2017, is not a hindrance to this.
So what are the main disadvantages of Russian mutual funds ??
1) A mutual fund can radically change its investment profile. That is, you want to invest in one asset class and thus acquire a fund that invests in the corresponding assets, but then, unexpectedly for you, the fund may change its investment strategy and instead of investing in some assets (in which you wanted to invest initially) it can transfer to other assets that you will not be interested in.
So you can buy a mutual fund that invests in the shares of large companies in Western Europe, and after a while you will see that you are investing not in the shares of Western European companies, but in the shares of companies developing countries... Such an example happened with the units of the mutual fund "Gazprombank - Western Europe", the shares of which were exchanged on 20.06.2017 for the units of the mutual fund "Gazprombank - India".
2) Many mutual funds deviate from the declared investment strategy or the stated benchmark. If we look at the profitability of mutual funds for 2016, investing in "gold", we will see that they all showed negative profitability. Only some of them showed minus 5%, while others showed as much as minus 15%. The cost of gold in rubles over the same period decreased by slightly more than 9%.
3) High costs, I would even say very high management costs.
The average amount of expenses incurred by a shareholder for managing the fund (taking into account the expenses of the depositary and others) in our country varies on average from 2% to 4.5%.
Moreover, the rule that the costs in funds passively following any index are much lower than in funds whose assets are actively managed by us does not work. So total amount annual costs of some passive funds investing in the MICEX index is given below:
4) A bank deposit implies that the depositor will eventually receive at least some income (unless, of course, any force majeure happens to the bank). Yes, this income may be insignificant and it will not always cover inflation, but in nominal terms it is always a plus.
The value of a share may not only not grow over time, and, accordingly, the shareholder's profitability may not grow, but also the value of a share may fall and even fall. High management costs, as well as discounts and surcharges for the redemption and acquisition of shares, will help the shareholder to receive minimal (and possibly no income at all).
5) Unlike bank deposits of individuals, units of mutual funds are not insured in any way in a deposit insurance agency. The shareholder has no insurance.
P.s. You also need to remember that the profitability shown by the mutual fund earlier does not guarantee the same profitability (or, in general, any profitability in the future). Specialists offering shares of a particular fund, as a rule, appeal to the profitability of this fund, which the fund received earlier.
So, at the end of 2014, mutual funds investing in stocks showed the best profitability foreign companies and gold. The devaluation of the ruble had a strong impact on profitability. The return for 2014 of some of these funds reached 80-100%. In 2015, these funds showed a more modest profitability in the region of 10-20%. And the leader in 2015 in terms of profitability were mutual funds investing in Eurobonds with a yield of 50-70%. True, at the end of 2016, these funds showed negative returns, and the leaders in terms of profitability in 2016 were already funds investing in the Russian power industry with a yield of 76-153%. I think you understand that they are unlikely to show a similar profitability at the end of 2017.
I am not against Russian mutual funds. In moderation, they help to diversify the portfolio, but before you start purchasing shares of a particular fund, you should be aware of the inherent shortcomings of our mutual funds.
Hopefully this information will be useful to you.
If the topic of mutual funds in the Russian Federation is of interest to anyone on this resource, please write in the comments.
This is my first post on the site and, according to established tradition, please add pluses))) True, I don't know why I need them.
Good luck with your investment!