Understanding Mutual Funds

PIF - what is it really?

The great popularity of mutual funds (mutual funds for short) shows that it is time to dwell on this instrument in detail, to give detailed information about it. Including on the basis of personal experience and the search for analogies with foreign approaches.

What is PIF in simple words

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A mutual investment fund is a form of collective investment in which a licensed management company that owns assets sells shares of its property (shares) to private investors. The activities of mutual funds are regulated by the Federal Law of November 29, 2001 No. 156-FZ “On Investment Funds”. A license that gives the management company the right to create and manage a mutual fund is issued by a separate structural unit of the Central Bank of the Russian Federation. By law, the authorized fund of a mutual fund cannot be less than 10 million rubles, but in practice a reasonable minimum of 30-50 million rubles. Shareholders are mainly individuals who are interested in simplifying access to assets, as well as reducing the cost of forming a portfolio.

Most mutual funds operating in the Russian market invest in domestic companies, as well as state and municipal ones. Foreign shares, real estate and precious metals can also act as assets. According to the structure of mutual funds can be:

• Bond funds;
• Equity funds;
• Mixed investment funds;
• Index funds, etc.

In addition, mutual funds are divided into open-ended (OPIF) funds - all types listed above, as well as closed real estate funds (ZPIFN). The fundamental difference between them is the availability of the REIT unit only at the stage of formation of a fund that invests in the real estate market. After the purchases are completed, the fund stops trading for a certain time. He receives income from renting out objects or selling them at a higher price. There are such ZPIF as:

• Construction - buy the rights to objects under construction for subsequent sale;
• Rental - rent out real estate;
• Developer - invest in promising plots of land for development;
• Mortgage - redeem the rights of claim on mortgage loans and receive income from payments on them.

How to evaluate the success of a mutual fund

From the point of view of the consumer, mutual funds should act as a simple and affordable alternative to stock portfolio investment. According to the current rules (in particular, ORDER of the Federal Financial Markets Service No. 09-45/PZ-N DATED NOVEMBER 10, 2009), management companies can also use derivative instruments for hedging transactions with securities. Effective work with such instruments, especially in falling markets, speaks of the high qualifications of managers. The main guidelines for the investor should be the long-term profitability of the fund in comparison with the benchmark (an index of the corresponding market sector), as well as the maximum drawdown observed over the period under review.

In practice, the lack of knowledge makes it difficult for inexperienced investors to critically assess the integrity of the services offered, and this reduces the value of the idea itself. To this it should be added that, in general, funds do not disclose the specific composition of investment portfolios, which does not allow investors to conduct their own analysis of published statements.

Despite the fact that mutual funds are created to make a profit from investment activities, they may temporarily be at a loss. From this one should not draw hasty conclusions about the quality of the management of the fund, because. market conditions are changeable. At the same time, the long-term losses of the fund against the background of the reference benchmark make us think about the professionalism of the management company. The activities of management companies are tightly controlled by the state, but this control concerns only the legal side. These companies do not bear any obligation to preserve investors' funds, charging a fee for asset management, regardless of the profitability of the funds.

In connection with the growth of state participation in the investment banking sector of Russia, the opportunities for creating and maintaining large mutual funds are increasingly concentrated in the hands of state-owned banks. Their work on the mutual fund market is not efficient and flexible, and in most cases does not provide long-term profitability at least at the level of bank deposits, losing to them in the absence of guarantees for invested funds. The most stable and predictable are funds that invest in bonds. Tellingly, it is them (according to investfunds.ru) that most private investors prefer.

One of the most controversial points is related to the valuation of the share. Formally, it is equal to the ratio of net asset value (NAV) to the number of shares. On the other hand, investors do not have the opportunity to control the process of distribution of the fund's income. The management company can verbally guarantee the reinvestment of dividends and coupons. If this is the case, share price growth should outpace industry indices, but this rarely happens in practice.

For example, consider the Dobrynya Nikitich equity fund managed by the company "". This is one of the oldest Russian mutual funds, founded in 1997. From September 22, 1997 (calculation start date) to December 29, 2018, its yield was 1973%. At first glance, this is a solid indicator, but over the same time, the Moscow Exchange index rose from 100 to 2359 points, or 23.6 times, outpacing the fund's return by almost 300%. In addition, the need to pay an annual management fee (currently 3.2%), as well as the lack of rights to receive dividends on the shares in which this mutual fund invests, put shareholders at a disadvantage compared to stock investors.

An even more eloquent example: a comparison of the profitability of mutual funds investing in precious metals with the dynamics of FXGD from the FINEX company as of December 31, 2018. The growth of shares of "Gold" funds occurred during the period of ruble devaluation. But during the same time, the benchmark - FXGD, pegged to the price of physical gold, showed even higher returns.

Advantages and disadvantages of mutual funds

Despite some parallels with U.S. mutual funds, and especially with exchange-traded funds (ETFs), mutual funds are significantly limited in terms of investment convenience and flexibility, as well as returns:

• OPIFs do not pay dividends and coupons;
• Have higher costs compared to ETFs;
• Low liquidity, most mutual funds are not traded on stock exchanges;
• Mutual funds are not suitable for short-term transactions as well.

But on the other hand, it is fair to cite some of the advantages of mutual funds that make them, in individual cases, the right choice for a prepared and demanding investor:

• Possibility to defer the payment of taxes through the exchange of shares of funds;
• The possibility of simplified investment in certain instruments in foreign markets without assigning the status of a qualified investor, accreditation from brokers or international financial institutions (investments in);

Imagine what impression the interlocutor will make on a person who, talking about himself, will say: “ I make money by investing in securities". I think most people will look at him as an alien.

Movies and the media have created the impression that all stock and bond people are very serious and successful, have a lot of money and are almost geniuses. If you don't believe me, just turn on the RBK channel. From analysts talking about stocks, indices, etc. just exudes professionalism.

But, in fact, anyone can make money on securities and for this you do not need to spend half your life studying the laws of the stock market. To do this, you can hire a professional manager who will buy stocks and bonds for you and try to provide you with the maximum income.

In order for anyone to try to make money on securities with the help of a manager, starting with a minimum amount (you can find funds with a unit value of 300-500 rubles), mutual funds (Unit Investment Funds) were created.

What is a PIF?

PIF (Unit Investment Fund) is a type of investment in trust management. This is a pool of collective investments, where the investor buys a share in the property of the fund.

The fund is created by a management company that has the appropriate license. Investors invest in the fund and with their funds the management company buys assets (stocks, bonds, etc.)

How can this be explained in simple terms?

Suppose there are 3 investors: Sasha, Petya and Vasya. They have money to invest, but they don't have the time, experience, or knowledge to invest in stocks, bonds, and other assets on their own.

To do this, they hire a management company that will deal with the purchase and sale of assets in order to make a profit. For this, investors will pay remuneration to managers.

Let's say Sasha has 500,000 rubles, Petya has 100,000 rubles, and Vasya has 10,000 rubles, a total of 610,000 rubles. They pool their money and create a fund. After investing, they receive shares, in proportion to their investments, which certify their share in the fund. If we assume that a share is worth 1,000 rubles, then Sasha will receive 500 shares, Petya 100 shares, and Vasya 10 shares, for a total of 610.

With the invested funds, the management company buys assets, for example, shares of Russian companies. Now suppose that after some time the value of the purchased shares increased, which means that the fund's assets also increased, for example, to 800,000 rubles.

After the rise in price of the shares, the share will no longer cost 1,000 rubles, but 800,000 / 610 = 1,311 rubles. So, if Petya decides to leave the fund, then he will receive 1,311 * 100 = 131,100 rubles. And he invested 100,000 rubles, which means that his profit will be 31,100 rubles or 31.1%.

Types of mutual funds

Mutual funds are divided into bonds, stocks, real estate and mixed funds.

• Bond fund.

The yield of such funds in the short term is not high, but in the long term they often show higher returns than equity mutual funds.

From the name it is clear that in this case the money is invested in bonds. The yield of these funds is comparable to bank deposits. But compared to banks, mutual funds have one plus. If you withdraw a deposit from a bank before the end of the investment period, you lose most of the profit. You can withdraw money from the fund at any time without losing interest.

Investing in bond funds entails the lowest risk, but also provides a low return.

• Equity fund.

Investors who want to get higher returns from investing money most often choose this type of fund. Equity mutual funds invest in shares of companies. They buy stocks that they think will rise in price soon and sell stocks that have reached their peak value.

In general, the stock market itself is the most risky, so the main feature of these mutual funds, along with high potential returns, is high risk.

• Mixed fund (mutual investment fund of mixed investments).

To ensure maximum profitability and minimum risks, mixed mutual funds use the principle of diversification. They invest in a wide variety of assets. These can be stocks, bonds, real estate, works of art, etc. They may even invest in other mutual funds.

• Venture funds.

These mutual funds make bets on the riskiest stocks. With this type of investment, about 2/3 of the fund's funds simply burn out. And only 1/3 makes a profit. But the profit is such that it more than covers all the losses.

• Real estate funds.

As the name implies, these mutual funds invest in real estate. This may be the construction of facilities from scratch and the subsequent sale or lease. It can also be the purchase of real estate and its subsequent development (repair, redevelopment, etc.) for the purpose of selling or renting.

A feature of this type of fund is that real estate mutual funds are closed. That is, investors invest money one-time and will not be able to withdraw funds before the end of the investment period. Money is usually invested for 3-5 years.

Organizational division of funds:

• Open mutual funds. A feature of this type of funds is that investors can buy or sell units at any time. The transaction is carried out within 1-3 business days. Suitable for owners of medium capital.
• Interval mutual funds. You can buy and sell shares only at certain time intervals, which are also called windows. Such windows are usually opened once a quarter or once every six months.
• Closed mutual funds. Such funds are suitable for long-term investments. An example of such a fund is a real estate mutual fund. Units are purchased once and cannot be sold until the end of the investment period.

Advantages and disadvantages.

Pros:

• Convenient amount for investment. Those who want to start investing in the stock market with minimal amounts can find mutual funds with a minimum unit value of 300-500 rubles. Wealthy people can invest amounts in the millions.
• Fast withdrawal of money. Investors can withdraw funds from mutual funds within 1-3 business days.
• No loss in unplanned withdrawal. Unlike banks, when withdrawing money from open mutual funds, you do not lose the accumulated interest.
• High yield. Mixed mutual funds and equity funds can provide high returns of over 50% per annum.
• Management professionalism. In large funds, managers are professionals of the highest level. Indeed, in order to provide income to its clients, the management company is forced to hire only the best specialists.
• State control over mutual funds. The activities of mutual investment funds are controlled by the state, so fraud on the part of the management company is excluded.
• Tax agent. All taxes that the investor must pay when receiving money from investing in mutual funds, the management company pays for it. That is, a person will not need to file a tax return, the company will do it for him.

Minuses.

• Risks. This type of investment comes with risks. The value of a share may decrease due to poor fund management.
• The difficulty of choosing a mutual fund. It will be difficult for a beginner to choose a mutual fund for investment, which will most likely bring him a profit.
• Manager commission. For their work in managing your funds, the company will take a commission from you. The fee ranges from 0.5% to 5%.

Who is investing in mutual funds suitable for?

Let's think about what kind of person is suitable for investing in mutual funds?

• No loans and no money problems. If a person has financial problems, then you should not invest in funds. And even more so, you should not take loans in order to invest.
• There is free money. One of the rules of investing should always be kept in mind: Don't invest an amount you can't afford to lose».
• Other ways of investing are used. Don't invest your entire portfolio in mutual funds. It is recommended to invest in mutual funds no more than 40% of your portfolio.
• Control over emotions. Whatever happens, your actions should be guided by reason, not emotions. You need to weigh each step, and not act impulsively.
• Interest in the stock market. You must like what you are doing. Only in this way will you be able to increase your professionalism and your income from this activity.

Real return on mutual funds.

If you think that all managers have the motivation to show the maximum profitability, then you are mistaken. Most managers have the task of simply beating the index against which the performance of their fund is compared. If a mutual fund invests in shares of Russian companies, then the results are compared with the RTS index. This is one of the reasons for the low profitability of investing in mutual funds.

The average yield of bond mutual funds is usually around 8-12% per annum. The yield of the most successful funds exceeds 50% per annum. But, you can see that many mutual funds bring losses to their customers.

How to choose a mutual fund?

Risk.

You need to understand that the higher the potential return of the fund, the higher your risks will be. So figure out how much you're willing to risk.

Term.

If you may need money in the near future, it is better to choose open funds. If you decide to make a long-term investment, then first of all look at the reliability of the mutual fund and its profitability.

Yield.

Under the law, funds cannot promise you a profit. All you can do is look at the fund's past performance and compare it to other similar mutual funds. But keep in mind that one year cannot be considered as a reliable indicator.

Sum.

If you are a beginner and decide to start with a small amount, then look for such funds with a minimum value of one share.

To date, the largest and most reliable mutual investment funds are: Sberbank, Raiffeisen, Alfa and Uralsib.

How is the investment process?

In order to buy a share in one of the funds, you need to come to the office of the management company or agent company and submit an application. To apply, you will need a passport and money to buy a share. If you plan to pay for the purchase of a share non-cash, then you only need a passport.

If you decide to invest in a mutual fund of Sberbank or another bank, then you will need to come to any of the branches of this bank to purchase a share.

It is recommended that you familiarize yourself in advance with the documentation and conditions for investing in a mutual fund of this management company on its website. Feel free to call this company and ask your questions to the consultant.

Don't forget that investment income is taxed at 13%.

Most of the current investment instruments require considerable knowledge and practical experience in their use. Especially you can not do without special knowledge if you expect to receive a solid share of the profits. But what about those who do not have the time or desire to “immerse themselves in the material”? We advise you to pay attention to mutual funds based on the principle of trust capital management.

Mutual investment funds are engaged in the accumulation of funds that are invested in various projects in order to make a profit. The creation of the fund, its legal registration and the direct conduct of business is carried out by the management company. She, in the terms predetermined by the contract, distributes the income of the fund among the investors, in proportion to their shares.

Among all possible areas of investment, mutual funds invest in:

• stock;
• bonds;
• the property;
• deposit certificates and deposits;
• mortgage
• loans;
• artistic values, etc.

The activities of investment funds are regulated at the legislative level, which reduces the risks of fraud in this area. At the same time, no one can insure the depositor against the risk of reducing or even losing the invested funds. Mutual funds in Russia can only predict the return on investment in them. This is done on the basis of a superficial analysis of the market and indicators of past reporting periods. But any guaranteed income in this area is extremely rare.

Investing money in a mutual fund provides for the acquisition by the investor of a part of his assets - an investment share. Most of the funds set a minimum contribution for such a share, which is measured in shares of the total assets of the mutual fund. The investment share of the fund certifies the participation of its owner in the association of investors and gives the right to receive a part of the profit. The depositor has the right to demand productive trust management of funds, the right to control the management company, the right to compensation for the value of the share in case of termination of the agreement and violation of its terms. In addition, an investment share is a security that can be sold, bought or pledged.

As for the risks of losing capital, in comparison with other investment options, they are not so great. As a rule, such funds are created by large management companies with investment experience. Mutual investment funds declaring conservative principles of their work are close in reliability to banking structures. However, the return on investment in them hardly exceeds bank deposits.

Not all funds are conservative in their investment strategies. So, in exchange for higher risks, an investor can receive an annual income equal to 40-60%, and in some cases even 100% of the initial investment. In any case, the profitability of the fund directly depends on the chosen instruments and the aggressiveness of the principles of work.

Types of mutual funds

Any private investor who wants to invest in mutual funds must understand their types and understand the differences. Experts divide all investment funds existing in Russia into several types:

1. Open share. In it, investors are endowed with the right to freely dispose of their shares. Investments in such funds are characterized by high levels of liquidity and accessibility to the general population, due to the minimum amounts for contributions.
2. Interval PIF. The contracts pre-determine the time intervals in which the unit holders have the right to sell their shares. Similar rules are established for the withdrawal of funds.
3. Closed-end investment fund. Such funds operate for a strictly defined period, at least 5 years. The sale and withdrawal of funds before the expiration of the mutual fund is excluded, however, in some cases, the sale of shares to other fund participants is allowed. A closed mutual fund is a kind of private club of investors created for a specific project. The value of the shares is calculated in millions of dollars, which is why participation in them is available only to wealthy investors.

There is a classification of mutual funds according to the areas of investment. It highlights:

1. Equity funds. The predominant direction of investment of such funds is shares. Potentially, such funds have the highest levels of return, but are also characterized by fairly large risks. According to experts, the most promising investments in equity funds will be long-term investments.
2. Bond funds. They are distinguished by their conservatism, since bonds assume a lower but stable yield. Ideal for investors who are looking for the most reliable and long-term investment instruments.
3. Money market funds. The main part of the assets of such funds is contained in deposits, due to which they are characterized by a guaranteed, but relatively low return.
4. index funds. index funds are contained in the shares of companies listed on the stock market. Their main income is earnings on stock indices. It should be noted that with relatively low risks, it can be quite high.
5. . Each such mutual investment fund is the founder of an enterprise. The creation of such funds is aimed at a specific type of business or commercial structure. According to investors, investments in private equity funds are characterized by increased risks with high rates of return.
6. Real estate funds. The goal is to invest money in a specific construction project. Such mutual funds are organizations, mostly of a closed type. They are created for a long period, which is why they differ in long-term investments. Quite an attractive investment option, characterized by high returns. It is especially attractive to wealthy players.
7. Mixed investment funds. The assets of such funds are contained in various financial instruments. They differ in average rates of return and average terms of investments. Investing in mutual funds of this category allows investors to diversify risks as comfortably and quickly as possible.

Advantages of mutual funds for investors

According to the reviews of professional investors, we highlight the main advantages of investing in mutual funds:

• Transparency of investment activity. In addition to strict state control over the activities of mutual funds, an important factor in their credibility is the transparency of their activities. Anyone can find financial reports of organizations in the public domain, which eliminates fraud.
• Trust management allows you to make investments in any investment instruments, even without the necessary knowledge. Professional management reduces risks as much as possible.
• By investing in a fund that has assets in different areas, the investor gets the opportunity to expand the possibility of making a profit within the framework of one project.
• Availability of mutual funds. Establishing a minimum size for deposits makes investing in them the easiest way to invest. Such investments are available today for most potential investors.
• Investment units have high liquidity, which is why investors in most open mutual funds have the opportunity to withdraw their funds at any time during the life of the fund.

How to choose a mutual fund?

The most common mistake when choosing an investment fund among novice Russian investors is the fact that they pay attention to the institution's profitability indicators. According to the objective opinion of major players, the amount of profitability is relative, since it is predicted, not calculated. Using this approach in choosing a fund, there is a high probability of investing in a mutual fund with an aggressive strategy, which will be able to show stable high results only as an exception.

According to experts, when choosing a fund, it is important to proceed from the tasks, goals and priorities in investment activity. In view of this, consider the aspects that should influence the choice of the investor:

1. The main goal of any investment activity is to make a profit. If the focus of the goal is a large income, it must be borne in mind that it will necessarily be associated with large risks of losing the money invested. If you want to minimize possible losses, investors need to focus on equity funds. If you want to minimize risks, bond funds are perfect.
2. Timing of investment. Speaking of short-term investments, you will have to choose between bond funds and money market funds. Longer-term investments are possible in real estate or stock funds.
3. The amount of capital. The main rule: the smaller the amount of investments, the narrower the range of possible mutual funds for choosing. As a rule, the minimum amounts for contributions are invested in money market, stocks and mixed funds.
4. Rating. The Internet is replete with all kinds of mutual fund ratings, depending on various criteria - profitability, asset volumes, funds raised, etc. When choosing between them, use only trusted and reputable sources.
5. Having a license. Before investing, read the documents of the fund you have chosen, its license for investment activities. Be sure to check the existence of the Trust Rules.

In any case, regardless of the fund you choose, you must be aware of the essence of your actions, taking into account the possible consequences listed above. Without understanding the working mechanisms, entry conditions, management control schemes, there will be no point in investing in any fund. By studying the details of the activities of mutual funds and choosing several investment funds for investments, you will create conditions under which your capital will definitely make a profit, even if investments are made in the simplest, but conservative and reliable mutual funds.

Recently, having visited the offices of several banks, I came across an active promotion of banking products called mutual funds or a simple mutual fund. Employees very persistently offered to use the opportunity to invest in mutual funds and receive high returns. At 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, yield graphs and how much could have been earned if I had invested money a year, 2 - 5 years ago. In fact, the data was impressive.

Tens of percent profit in a year or two.

And immediately there was a desire to entrust their hard-earned money and participate in the pursuit of profit.

PIF yield for 2017

An article for those who are planning, planning or have already invested in mutual funds.

Pitfalls and the main drawback of investing in mutual funds in Russia.

What is interesting about PIF

To begin with, let's analyze (remember) - what is it? And how will it be useful for us?

A mutual fund can be viewed as a common pool for all investors. Money is collected and various assets (stocks, bonds) are bought with them in a certain proportion. Each contributor or shareholder has a certain share or share. In proportion to the investment.

Pivot Pros:

• 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 contributed.

Buying one share for 2-5 thousand rubles, you invest in dozens 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. If you want to invest in most advanced economies at the same time, it's easy. True, this requires a little more money. But several tens of thousands can easily be met.

Of course, you can do all this on your own. Anyone can conclude an agreement with a broker and companies of interest.

But this requires a lot of money. So much money. Additionally, spending more than one hour (or even several days) of your time.

In mutual funds, everything will be done for you. I bought a share - I received a package of the shares you need. And you don't have to do anything else.

Yield Comparison

But don't be discouraged by the high returns. Markets are unstable. And today's profits are not guaranteed in the future. But we're not talking about that.

In order to understand how efficiently your money works, you need to compare the result with some kind of standard.

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 mutual fund Sberbank-America completely copies, which includes the 500 largest US companies.

Comparing the charts with other companies investing in a similar way reveals an interesting picture.

Long-term returns vary greatly.

On the picture:

• Sberbank - red graph;
• Raiffeisen - green;
• ETF is white.

On the X scale, percentage returns since the beginning of 2014.

Total Return - the final profitability of the funds.

Annual Eq - average annual profit.

Mutual fund fees

What's the catch? Why such a difference in returns? And a very significant one at that. Almost one and a half times!

The bank will not tell you about this. And if they do, they will veil it in such a way that you will not pay attention to it as an unimportant point.

Three main factors influence the profitability of a fund (UIF):

1. Legislation.
2. Costs.
3. Management strategy.

Legislation.

By law, part of the invested funds, the fund must keep to the cache. That is, this money does not buy assets. They are just dead weight.

When a client sells the units he owns, the fund makes a payout from this reserve. Part of your money does not work, but lies in a stash and is waiting 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” potential customers do not particularly focus on this point. They briefly speak, necessarily adding the word "only ...".

So what are these costs?

Entrance fee. When buying shares, automatically from all shareholders, a certain percentage of the amount of funds or the so-called surcharge will be withheld. It can vary from 1.5 to 4%. Depending on the appetite and impudence of the management company. On average it is 3%.

Naturally, some of this money goes as a reward to the bank or employee "for selling the product." That is, from your pocket. You have not managed to earn anything yet, but you have already incurred expenses.

Is 3% too much or too little?

Example. Let's say you have 100 thousand rubles. With this money, shares of the fund were bought. A mutual fund for 10 years showed an average annual return of 12%. During this time, the capital would have grown to 310 thousand rubles.

So? No not like this.

Having paid a three percent 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. Losing another ten as lost profits.

One could turn a blind eye to this. If this was the only commission of the management company.

Exit fee. Or the so-called discounts when selling shares. The management company redeems your shares at a discount. The percentage again depends on the company's appetite and the tenure of the shares. On average, from 2 to 3%. Usually no fee is charged (but not for everyone) when holding shares for more than 3 years.

What do we get?

Bought shares, lost 3%. Sold shares - still lost 3%. Invested for 1 year. The fund earned 12% profit. Your net profit minus costs is only 6%.

On the ten-year period, from the example above, you lose another ten.

And one could turn a blind eye to this (albeit with difficulty). We can say that they were only flowers. The most interesting is ahead.

Management fee. This item of expenses includes the payment of the Criminal Code itself, and other expenses. 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.

It would probably be more correct to pay the mutual fund for the result shown. Earned profit for customers - received a certain percentage. If not, then there is no need to pay.

But management companies think differently. And they steal money from customers every year.

How does this affect our money? And on the final profit?

With an average annual fee of 4%, if the fund earns 12%, the real return will be 8% per annum. You lost 33% of profit.

Putting all costs together.

The conditions are the same. There are 100 thousand, the fund grows by an average 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 receiving losses as a result of the operation of the mutual fund. When the annual management fee is again added to the resulting losses. Received a loss of 4%. We add another 4% commissions. And here the loss is doubled.

Pitfalls and other hidden points

To all of the above, you can additionally add a couple of hidden points.

Purchase of "own" assets. This usually applies to bond funds. The bank issues debt securities. And the management company, working in conjunction with the bank, invests investors' money in these "own" ones. Even if it is not spelled out in the management strategy.

Everyone benefits (except final shareholders). The bank successfully placed securities. The management company received a certain bonus for the redemption of the assets "necessary" for the bank.

Advertising booklets. Offices like to show various pictures (charts and profitability indicators) in brochures. They have roughly the same meaning. When investing in a mutual fund (name of the fund) on such and such a date of the year and up to ...... .., a profit of 50 (100, 200%) was received.

Everything is simple here. A favorable period is selected for which the fund showed the maximum profitability (a year or two, and even just a few months). And this information is “fed” to customers. See what opportunities, what profits. Everything is good and wonderful.

There is no full disclosure. 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!?

Does it seem that the main goal of mutual funds is not to make a profit?

Management companies do not want to meet the needs of potential and existing shareholders. I'm talking about the annual costs in the form of fees charged.

But with them, everything is just bad. For some reason, they do not decrease, but increase. Even in conditions of high competition, among similar funds. No one is in a hurry to reduce management fees.

There is such an opinion that the Criminal Code is trying to squeeze as much money from customers as possible.

In conclusion or an alternative to a mutual fund

Taking advantage of the financial illiteracy (or lack of awareness) of the population, funds continue to lure investors. 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 more is better.

And of course, they will definitely tell you what and where it is better to invest for many years. Markets are unstable. But in the long run, everything grows.

Partly it is. But due to commissions, a person catastrophically lags behind the market for long periods of time. Losing almost half of their capital over several years simply on trading costs alone.

In the West, this has long been understood.

And one of the main factors of successful investment is low costs. To do this, investors use ETFs.

The meaning is almost the same as that of the PIF. Only at a much lower annual cost.

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 expenses. The lowest in the country.

In the West, there are funds with annual fees of 0.1% and even 0.02% per year. in which you can invest. But….

Many nuances may arise. Inconvenience and other related costs - translation fees, language barriers, brokerage costs, double taxation and other other nuances.

At the end of the article, see a comparison of mutual funds, ETFs and the index itself, on the basis of which the funds work. For the last few years.

In this article, we will look at the topic of mixed investment mutual funds and answer the question - is it worth investing in them.

A mutual fund whose assets are invested in bonds, that is, fixed income securities and stocks, is called a Mixed Investment Mutual Fund.

Trade-off between reliability and income

The main task of mixed investment fund managers is to find a compromise between profitability and investment reliability. The fund manager must be a high-class professional in order to extract the maximum benefit for investors using the available financial instruments.

Experts with a certain degree of mistrust refer to mutual funds of mixed investments, from their point of view, Dalenko fund managers do not always manage to make correct predictions of changes in the stock markets.

But, these are just doubts, and, of course, they should not be put at the forefront. The advantages of mixed mutual funds become apparent in a volatile but predictable financial market. However, if there is a stable growth of the market, for mixed investments this means a decrease in profitability.

For investors who like the concept of mixed investments and who want to personally manage their existing assets, experts advise using a profitable unit swap strategy. In our table, we bring to your attention several mutual funds of mixed investments:

The table below contains both open-end mutual funds and interval funds of mixed investments. If in open mutual funds you can buy and sell on working days, then in interval transactions, transactions are carried out only at the time intervals specified by the fund.

It is recommended to buy index funds in the initial phase of growth, but when there are signs of a fall, you should buy bond funds. The advantage of this approach is that funds and indexes and bonds are distinguished by small premiums, commissions and discounts. This approach is not good for every situation - if we are talking about a small amount, for example, 10 thousand rubles, then you should not change shares, time will cost more. In this situation, mixed funds are better.

How to choose the right mutual fund

Before deciding which mutual fund is worth investing in, you need to take the time to thoroughly study the conditions for acquiring and selling shares, understand the fund’s strategy and communicate with managers in order to form an opinion about their qualifications and get answers to all questions. This is the only way to invest in a truly reliable and profitable mutual fund.