An

Introduction
to Mutual
Funds

Group Members
Marina Yunus 192/MSMGT/f14
Salma Hidayat 184/MSMGT/f14
Rabbia khan

59/MSMKT/f14

What are Mutual

Funds?
Mutual funds are a type of investment
that takes money from many investors
and uses it to make investments
based on a stated investment
objective.
Each shareholder in the mutual fund
participates proportionally (based
upon the number of shares owned) in
the gain or loss of the fund.

Types of Mutual Fund

There are basically two types of Mutual Funds:
Open-Ended Mutual Funds
Closed-Ended Mutual Funds

Open ended Mutual

fund
These are mutual funds which

continually create new units or redeem

issued units on demand. They are also
called Unit Trusts. The Unit holders buy
the Units of the fund or may redeem
them on a continuous basis at the
prevailing Net Asset Value (NAV). These
units can be purchased and redeemed
through Management Company which
announces offer and redemption prices
daily.

Closed Ended Mutual

Fund
These funds have a fixed number of
shares like a public company and
are floated through an IPO. Once
issued, they can be bought and sold
at the market rates in secondary
market (Stock Exchange). The
market rate is announced daily by
the stock exchange.

Major Market Players

National Investment Trust Ltd.
JS ABAMCO Ltd.
Arif Habib Investment Management Ltd.
Al Meezan Investment management Ltd.
Atlas Asset Management Ltd.
UBL Fund Managers Ltd.

Asset Management Companies in

Pakistan

Mutual Funds in Pakistan

Why do People Invest in

Mutual Funds?
Mutual funds offer investors an affordable way to
diversify their investment portfolios.
Mutual funds allow investors the opportunity to
have a financial stake in many different types of
investments.
These investments include: stocks, bonds, money
markets, real estate, commodities, etc
Individually, an investor may be able to own stock in
a few companies, a few bonds, and have money in a
money market account. Participation in a mutual
fund, however, allows the investor to have much
greater exposure to each of these asset classes.

Continued
Most mutual funds are professionally
managed by an investment expert known
as a portfolio manager.
This individual makes all of the buying and
selling decisions for the fund.
There are thousands of different mutual
funds in Pakistan.
This provides investors with many options
to help them achieve their investment
objectives.

Basic Mutual Fund

Categories
Mutual Funds can be divided into four basic
categories based upon the funds investment
objective.
These categories are:
1.

Money Market Mutual Funds

2.

Stock Mutual Funds

3.

Index Funds

4.

Bond Mutual Funds

Money Market Mutual

Funds
This is the most conservative type of mutual fund.
The goal is to maintain the $1 value of its shares
while providing income.
Invests in high-quality, short-term securities such
as certificates of deposit, Treasury Bills, and
Treasury Notes.
MMMFs are an appropriate place for savings.
These funds have typically offered higher interest
rates than bank savings accounts.

Stock Mutual Funds

Type of fund that invests in stocks.
These funds are also known as equity funds.
There are many different types of stock
mutual funds.
Some of the most common include:
Large-cap funds, mid-cap funds, small-cap
funds, income funds, growth funds, value
funds, blend funds, international funds, and
sector funds.

Index Funds
Index funds invest in securities to mirror a
market index, such as the KSE 100. An index
fund buys and sells securities in a manner that
mirrors the composition of the selected index.
The fund's performance tracks the underlying
index's performance

Bond Mutual Funds

Type of mutual fund that invests in bonds.
There are different types of bond mutual funds.
Typically, bond mutual funds have the objective of
providing stable income with minimal risk.

Mutual Fund Advantages

Broad diversification

Diversified stock funds hold large and small company

stocks broadly spread across industries and economic
sectors
Diversified bond funds hold bonds with different
maturities, coupon, and credit quality

Ability to retain professional

investment management at a
reasonable cost
Investor convenience

Many offer fund family

Simplicity:
Most investors do not have the knowledge,
time or resources to build their own
portfolio of stocks and bonds. Stock
investors often have extensive knowledge
with fundamental analysis or technical
analysis. However, buying shares of a
mutual fund enables an investor to own a
professionally managed, diverse portfolio
with little or no knowledge of investing
concepts and strategies.

Accessibility:

With as little as $1,000 an investor can get started investing

with mutual funds. However, the beginning investor can
easily find easy tips about how to buy mutual funds online or
in bookstores and get started investing within minutes or just
a few hours

As you grow your portfolio of mutual funds,

you will want to diversify into various mutual
fund categories and types. You can invest in
mutual funds that cover the main asset
classes (stocks, bonds, cash) and various subcategories or you can even venture into
specialized areas, such as sector funds or
precious metals funds.

Perhaps the greatest benefit of all is

that investors can save countless hours
of time, energy and frustration involved
with the research and analysis required
to find quality investments to hold in a
portfolio. Mutual funds enable investors
to do more of the things in life they
enjoy rather than spending time and
energy on investment matters.

Mutual Fund Disadvantages

Volatility can be significant

Diversification

doesnt protect investors from the

risk of loss from an overall decline in financial
markets
Mutual fund regulation doesnt eliminate the risk of
an investment falling in value

High management
fees and sales
commissions
No-load funds

The END