If you want your money to grow, why should you manage a mutual fund?

If You Still Don’t Know About Mutual Funds, Start Here

Think about this: if you have a certain amount of money but lack the knowledge to pick stocks yourself or don’t have the time to manage your investment portfolio, what would you do? That’s where mutual funds come into play.

Simply put, a mutual fund is a “money tank” that pools funds from many investors and then employs certified financial professionals (such as the Securities and Exchange Commission) to invest that money in various assets according to a set policy. These assets can include stocks, bonds, or commodities.

When the investments generate returns, those benefits are distributed to each investor proportionally. The advantage of this method is that small investors can access a variety of investment types, even if their capital isn’t large.

Why Invest in Mutual Funds: 3 Key Benefits You Should Know

Better Risk Diversification

By pooling money from many investors, the total amount becomes large enough to diversify across different asset classes, such as Thai stocks, foreign stocks, bonds, or even agricultural products. This diversification reduces the overall impact if one asset type encounters problems.

Managed by Experts

Your money isn’t left idle; it’s managed by experienced fund managers who have undergone training and certification according to regulations. All operations are regularly audited by the Securities and Exchange Commission to ensure transparency and protect investors.

Suitable for Those Without Time

New investors or those who lack time to study market data, manage portfolios, and make adjustments according to market conditions will find mutual funds suitable because everything is already managed for you.

How Many Types of Funds Are There? Categorized by Redemption Features

Closed-end vs. Open-end Funds

Closed-end funds are like long-term contracts. Investors purchase units once during the fundraising period. After that, they cannot buy more or sell units back until the fundraising ends (usually 5-10 years), at which point they receive their money back. The advantage is that fund managers have ample time to plan investments. The downside is that if you need emergency cash, you cannot sell units back.

Open-end funds allow you to buy and sell units at any time. On any day you need cash, you can request to sell units back for cash (usually settled the next day), providing greater flexibility but also increasing liquidity risk for the fund.

Types of Funds Based on Investment Policy: Which Should You Choose?

Money Market Funds: The Safest

Funds that invest only in deposits and short-term bonds, offering typical returns (around 1-3% per year), with very low risk. Suitable for those just saving capital or wanting a safe place to store money.

Bond Funds: Well-Balanced

Invest in government bonds, state enterprise bonds, and corporate bonds, providing higher returns than money market funds (around 3-5%), but still with low to moderate risk.

Mixed Funds: For Moderate Investors

Invest in both bonds (debt securities) and stocks (equities), with stocks not exceeding 80%. Returns are higher, but risk increases accordingly. Suitable for those willing to accept some risk.

Flexible Hybrid Funds: For Dynamic Investors

No fixed proportion; managers can adjust from 0% to 100% stocks based on market forecasts. If the market is hot, they increase stocks; if they predict downturns, they reduce stocks. This can lead to higher returns but also higher risk.

Equity Funds: For Aggressive Investors

Invest at least 80% of the portfolio in stocks. Returns can be very high, but volatility is also significant. Suitable for long-term investors (5 years or more) who can tolerate price fluctuations.

Sector Funds: Betting on Specific Industries

Invest only in stocks within a single industry, such as banking, communications, or transportation. Returns can be very high, but risk increases because of concentration. Suitable for those who have already forecasted growth in that industry.

Alternative Asset Funds: For Maximum Diversification

Invest in commodities like gold, oil, or wheat. These prices are highly volatile, offering high potential returns but also the highest risk. Suitable for those who want to diversify across asset classes and can handle significant risk.

Steps to Choose the Mutual Fund That’s Right for You

Step 1: Self-Assessment

Ask yourself: if your investment drops 20%? 30%? 50%? What is the maximum risk you are willing to accept? Write down this number to compare with the volatility of different funds later.

Step 2: Review the Current Economic Outlook

When the economy is booming, it’s better to invest more in stocks. During downturns, bonds might be preferable. This step helps narrow down the list of funds to consider.

Step 3: Study Fund Details

From the remaining 3-5 shortlisted funds, read the prospectus to understand trading conditions, liquidity, dividend payout, and fees to get a complete picture.

Step 4: Check Past Performance

Choose funds with good returns, low volatility (if possible), and appropriate risk diversification. Review performance over the past 3-5 years, not just one year.

Step 5: Continuous Monitoring

After investing, review your portfolio every 3-6 months to see if economic conditions have changed. If significant changes occur, you may need to switch funds later.

Why Returns Are Not Immediate and How to Measure Them

When you buy units, your profit or loss isn’t “real” until you sell the units back. In the meantime, returns are of two types:

Capital Gain (Profit from Price Movements)

Look at NAV (Net Asset Value), calculated from the value of assets held by the fund at the end of the day minus liabilities and expenses. If today’s NAV is higher than when you bought, you have a profit (not yet realized). If lower, it’s a loss.

Dividend (Dividend Payments)

Some funds distribute cash dividends periodically without requiring you to sell units. This provides immediate actual returns even if the fund isn’t sold.

To know your real return, consider both components together.

The End: Idle Money or Growing Money

In a world where the cost of living keeps rising, leaving money idle means accepting that its value is eroding. Mutual funds are tools that offer options, even with limited knowledge, experience, time, or small capital.

There is no one-size-fits-all formula for funds, but there is a fund suitable for you. The rest is about starting, taking action, and continuously monitoring.