Mutual funds are an attractive alternative to traditional bank deposits investment. Start investing in these products is simple, has low costs and offer several alternatives for each risk level. Armando Herrera, CEO NCF funds, said the basics you need to know to choose this type of asset.
How Mutual Funds Work?
These are volunteers, individuals or corporations, contributions to a fund, which is managed by a fund management company. This is supervised by the Superintendence of Securities (VPS).
Investors give money to the Administrator and the mandate is to invest in different types of assets that may be-roughly-stocks or bonds. The condition is that the product has to talk to the level of risk tolerance of the client.
How to invest in them?
Anyone can approach the office of a placement agent. Under the new regulation of mutual funds, these include: Banks, Financial Institutions, Banks Municipal, Rural Banks, Edpymes or Brokerage Firms.
Institutions should have a contract with the fund management company, through which channels is used to place mutual fund products.
Is there a minimum amount to invest?
Amounts to access a Mutual Fund are not figures of several zeros. One can access small amounts and gradually adding.
The minimum amount may vary according to the characteristics of the particular product that a person wants to invest. However, these amounts can range from S /. 500 and S /. 1,000 approximately.
What are the costs of doing so?
Basically, fund management companies charge fees that are based on the profitability of the product. The commission rate charged depends on the needs of each fund.
“An equity fund is very volatile; you have to be glued to the screen watching online information. There are other funds that invest in instruments that are much more predictable, where different committees are established, “Herrera said.
In the Peruvian market, they can go in the order of 0.5% to even above 3%.
What type of products exists?
Executive explained that there are 12 mutual fund categories, however in Peru only used seven. Of these, the most important is the Instrument of Debt, which represents 81% of the total industry.
This product invests primarily in deposits, savings accounts, and corporate bonds, certificates of deposit of financial institutions or repurchase agreements collateralized by shares. These used to be called as “fixed income”.
Among the products of Debt Instruments, there is division as deadlines, i.e. short-term funds, short-term, medium and long term.
This type of mutual fund is less risky than the mixed-mixed fixed income funds variable income, while the product for more aggressive investors would be equity.