University of Punjab

Gujranwala Campus

Financial Institutions
Assignment

Submitted to: Sir Sajid Nazir

Submitted by: Group 2 Sohaib Asif (BB08102) Ali Sajid (BB08119) Arslan Javed (BB08138)
Mutual Funds

Mutual Funds are a collection or a pool of funds generated by investments of individuals and corporate. This pool is then invested in different avenues like stock, money-markets, bonds, Sukuks, TDRs, securities and any avenue of investment .The pool of funds is managed by expert fund managers who take decisions on investing these funds in different avenues to achieve better rates of return. The return is then distributed amongst the pool members and fee of managing the pool is charged, which is usually nominal and is adjusted in net asset value of the fund, by the asset management company. There are two classifications of Mutual fund Open ended fund and Close ended fund. Open Ended Vs Close Ended Mutual Fund Open ended fund are those in which you can invest and disinvest on your convenience and choice. There are no binding or tenure of investment set on your investment. A net asset value (NAV) is announced every day. Close ended funds are those funds in which you invest once they are offering there IPO or initial public offering .The fund is then listed and traded like a stock on a stock market. Mutual Funds in Pakistan Al-Meezan Mutual Fund Asian Stocks Fund Atlas Fund of Funds Dominion Stock Fund First Capital Investment ltd Mutual Fund First Dawood Fund Golden Arrow Meezan Balanced Fund JS Growth Fund Pakistan Premier Fund

Types of Funds Money Market Fund They are the safest for the novice investor. They are the easiest, least complicated to follow and understand. Almost without exception, every mutual fund investment company offers money market funds. Money market funds represent an indispensable investment tool for the beginning investor. They are the most basic and conservative of all the mutual funds available. Income Funds The objective of income mutual funds is to seek a high level of current income commensurate with each portfolio's risk potential. Investors seeking current income

higher than money market rates, who are willing to accept moderate price fluctuations. Investors willing to "balance" their equity (stock) portfolios with a fixed income investment. Investors who want a portfolio of taxable bonds with differing maturity dates. Investors interested in receiving periodic income on a regular basis. Income and Growth Funds The primary purposes of income and growth funds are to provide a steady source of income and moderate growth. Such funds are ideal for retirees needing a supplement source of income without forsaking growth entirely. Growth and Income Funds The primary objectives of growth and income funds are to seek long-term growth of principal and reasonable current income. By investing in a portfolio of stocks believed to offer growth potential plus market or above - market dividend income, the fund expects to investors seeking growth of capital and moderate income over the long term (at least five years) would consider growth and income funds Balanced Funds These funds generally have portfolios consisting of bonds, preferred stocks, and common stocks. They have fairly limited price rise potential, but do have a high degree of safety, and moderate to high income potential. Investors who desire a fund with a combination of securities in a single portfolio, and who seek some current income and moderate growth with low-level risk, would do well to invest in balanced mutual funds Growth Funds The primary objective of such funds is to seek long-term appreciation (growth of capital). The secondary objective is to make one's capital investment grow faster than the rate of inflation. Dividend income is considered an incidental objective of growth funds. Growth funds are best suited for investors interested primarily in seeing their principal grow and are therefore to be considered as long-term investments - held for at least three to five years. Jumping in and out of growth funds tends to defeat their purpose. Index Funds The intent of an index fund is basically to track the performance of the stock market. If the overall market advances, a good index fund follows the rise. When the market declines, so will the index fund. Index funds' portfolios consist of securities listed on the popular stock market indices.the fund merely purchases a group of stocks that make up the particular index it deems the best to follow. The stocks in an index fund portfolio rarely change and are weighted the same way as its particular market index. Thus, there is no need for a portfolio manager.

Sector Funds Investors in sector funds must be prepared to accept the rather high level of risk inherent in funds that are not particularly diversified. Any measure of diversification that may exist in sector funds is attained through a variety of securities, albeit in the same market sector. Substantial profits are attainable by investors astute enough to identify which market sector is ripe for growth - not always an easy task. Specialized Funds Specialized funds resemble sector funds in most respects. The major difference is the type of securities that make up the fund's portfolio. For example, the portfolio may consist of common stocks only, foreign securities only, bonds only, new stock issues only, over - the - counter securities only, and so on. Islamic Funds In case of Islamic Funds, the investment made in different instruments is to be in line with the Islamic Shairah Rules. The Fund is generally to be governed by an Islamic Shariah Board. And then there is a purification process that needs to be followed, as some of the money lying in reserve may gain interest, which is not desirable in case of Islamic investments. Risks in Mutual Fund Investing There is some degree of risk in every investment. Although it is reduced considerably in mutual fund investing. Do not let the specter of risk stop you from becoming a mutual fund investor. However, it be-hooves all investors to determine for themselves the degree of risk they are willing to accept in order to meet their objectives before making a purchase. Risk Levels of the Various Types of Mutual Funds Low-Level Risk Mutual funds characterized as low-level risks fall into here categories Money market funds funds Moderate-Level Risk Mutual funds considered moderate-risk investments may be found in at least the eight types categorized below. Income funds income funds Balanced funds Growth and Treasury bill funds Insured bond

Growth funds bond funds

Short-term bond funds

Intermediate

Insured government/municipal bond funds High-Level Risk

Index funds.

The types of funds listed below have the potential for high gain, but all have high risk levels as well. Aggressive growth funds Specialized funds Commodity funds International funds Precious metals funds Option funds Sector funds High-yield bond funds