How the Mutual Fund
Posted on Nov 14, 2000 08:15:27 AM
For the investor not prone to risk much, but at the same time seeking to earn income on their investments, one of the alternatives to bank deposits may be mutual funds (PIFs). As we have repeatedly noticed a bank deposit is generally low-yielding instrument. According to Russian Economic Society, the average rate on deposits of individuals in credit institutions (other than deposits “on demand”) in 2003, for example, amounted to 10.47%, ie 5.23% for six months. But inflation for the same period – 6,1%. In other words, the real return on deposits received an empty bit, but negative: it “ate” inflation. At the same time the stock market at the same point in time they would get real income.
And the majority of mutual funds on average showed higher returns than bank deposits. There were periods when the financial performance of management companies (those who actually earn that income) grow even better than the market. According to the National League of Governors, the money invested in one of the ten best Russian mutual funds a year ago, could give a yield in the range of 34-50% per annum. The average rate on deposits in domestic banks for the same time – 10,3%, while, say, a cash dollar had a negative return.
And the Bank, and DFA work with depositors’ money, but under different conditions.
Bank, enclosing the deposit agreement, agrees to a specified time to return to the depositor adopted by the amount and pay it defined – fixed – rate. Then the bank itself invests borrowed funds. When investing, he can earn much more than obliged to return to the depositor, and can “burn”. In any case, it would not affect the value of a specified rate on the deposit (of bankruptcy now, do not say). Saver mutual fund will receive their entire profit earned by the fund (net of management expenses). But the risk of investing rests entirely on the investor – not on UIF.
In other words, Pytheas have an increased risk, but potentially higher returns.
How is the PIF? This sort of “battery” means that citizens (and entities) pass in trust management company for a profit. Of course, the stock market can operate independently. But this requires time and expertise. You can also give money to individual asset management. But if a professional manager operates only with your funds, the sum of this requires very large, about fifty to one hundred thousand dollars. And if the means of many investors are combined into a single pool, then it can not go in with a very large sum – literally a few thousand. And to manage this money will be professional financiers who are interested in achieving good results, because of these results depends directly on their own remuneration.
deposit, fund, income, mutual fund, yield,- Results for mutual fund
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