A mutual fund is a collective investment scheme that combines money from several investors and invests that money for profits and income on your behalf. An asset management company that is licensed by the SECP (Securities and Exchange Commission of Pakistan) invests that money.
Mutual Funds are a good, safe and simple way of investing if you have never invested before and have some money that you can set aside for a couple of years.
Types of Mutual Funds:
There are two types of mutual funds; An open-end fund and Closed-end funds.
An Open-end Fund:
The open-end funds do not have a fixed pool of money. This kind of fund continually redeems issued units on demand or creates new units. The fund size does not have any limit. The price of the units do not change in response to demand but are driven by the value of the fund’s underlying assets. You can buy or sell units at net asset value (NAV) which the asset management company (AMC) announces daily.
A closed-end fund has a fixed number of shares that are issued through an Initial Public Offering. The investors can buy and sell these shares at market rates on the Pakistan Stock Exchange.
Each share in the open-end represents investors’ proportionate ownership of the fund. Investors purchase mutual fund shares from financial companies, banks or the fund itself. The shares of open-end mutual funds are not treated on Pakistan Stock Exchange or other secondary markets.
According to the rules and regulations, an independent trustee that is registered with the SECP has custody of all mutual fund assets. The job of the trustee is to make sure that the asset management company invests the assets according to the approved investment policy and authorized investments and all the assets are registered in the name of the trustee.
Benefits of Investing in Mutual Funds?
Investing in mutual funds have the several advantages such as:
- Investing in mutual funds is easy and low-cost. You can start investing from as little as PKR 5,000.
- By investing in mutual funds, you will not have to be worried about the responsibility for selecting the stocks and bonds to be purchased. Also, you will not be burdened by the day-to-day management and safekeeping of the investments selected.
Best Mutual Funds in Pakistan:
There are many mutual funds functioning in Pakistan. I have listed some of the best mutual funds based on their NAV (net asset value) according to the Mutual Funds Association of Pakistan.
Golden Arrow Selected Stocks Fund:
In 2012, Golden Arrow Selected Stocks Fund was ranked 5th in the list of the Top 100 Funds Worldwide by Thomson Reuters Lipper when it generated 105.29% profit. It is the best mutual fund not only in Pakistan but also in Asia.
Golden Arrow Selected Stocks Fund strives to be a leading investment company in the financial industry by good asset allocation, diversifying its business and generating better financial results for the stakeholders.
Safeway Fund Limited
Safeway Financial Services Limited was established in 2001. It has been an early participant to the mutual fund market in Pakistan and was registered as the first Pakistani Mutual Fund Company.
Safeway is an online platform that offers mutual funds for every investor. They provide the best mutual fund schemes with complete transparency on all underlying investments. Its mutual fund schemes offer competitive returns and convenience in investing.
UBL Al Ameen Funds
Al-Ameen Islamic Cash Fund is an ideal investment facility which allows you earn a stable and attractive riba-free return to your investment while providing you the flexibility of instant access to the money at all times.
NAFA Stock Fund
NAFA stock fund aims to earn a potentially high return with diverse asset allocation between Money Market investment avenues and Shariah Compliant Equities while providing principal protection. Key holdings of NAFA funds belong to Fertilizer, Cement and Oil & Gas Exploration Companies.
Atlas Islamic Income Fund
Atlas Islamic Income Fund was established in 2008 by a Trust Deed between Central Depository Company of Pakistan Limited as trustee and Atlas Asset Management Limited as management company.
The fund aims at providing shareholders with a stable rate of current income that is consistent with long-term preservation of assets in a manner that complies with Shariah. It also strives to take advantage of opportunities to realize capital appreciation and provide the investors with a rate of return with a highly diverse portfolio of short, medium and long term income instruments.
Some of the benefits of Atlas Islamic Income Fund are:
- Online access to individual accounts
- Riba-free returns
- Professional fund management expertise
- Shariah-compliant avenue of investment for individuals, retirement schemes and corporate clients.
- Minimum investment of as low as PKR 5,000.
- No minimum holding period
- Easy withdrawal of money
- Risk diversification
Alfalah GHP Balanced Allocation Fund
Alfalah GHP Balanced Allocation Fund is an open-end fund which strives to generate Shariah-compliant returns on investment. The scheme invests as per the respective Allocation Plan by investing in Shariah Compliant Collective Investment Schemes in accordance with the risk tolerance of the investor.
The fund comprises two plans; active allocation plan and Islamic Balanced Allocation plan that gives the investors the freedom to dial-up or dial down their investments.
Dawood Islamic Fund
Dawood Islamic Fund invests in all the Shariah-compliant tools like Ijarah, Sukuk, Islamic Banking, and Shariah-compliant equity stocks. This provides substantial Halal returns to their investors in a short term.
The main objective of Dawood Islamic Fund is to provide Halal profit to shareholders by investing max 25% of net assets in equities with the high percentage of non-equity income providing stability.
JS Islamic Fund
JS Islamic Fund grows investor’s money in the long term in compliance with principles as advised by the Shariah Advisory Board while ensuring liquidity.
The fund investments are limited to only those asset classes that are approved by the Shariah Advisory Board and the companies where they invest are regularly screened for Shariah compliance.
ABL Islamic Financial Planning Fund
ABL Islamic Financial Planning Fund is an open-end fund. It mainly invests in ABL Islamic Income Fund and ABL Islamic Stock Fund to generate lucrative returns on investment as per the respective allocation plan.