Thursday, February 23, 2012
International
English
USD
Investor
Advice is generally given to investors to avoid investing in a single fund type; as in this way investor is exposed to excessive risk and dependence on the development of a single fund. The investor has to remember that even the best fund may fall in the course of time.
When undertaking his/her investment, the investor may often be limited by the amount available to him/her for investment. It is the Portfolio Sub-Funds that respond to the need of portfolio investment, as within a single fund, they already offer a diversified investment option following the development of two or three or more sub-funds.
Investment in classical mutual funds does not provide any level of guarantee, neither of the yield, nor of the principal. This, however, does not mean that investment in mutual funds is a reckless risk. The reason for investment via mutual funds is in particular the higher yield potential that can be achieved by investing in a fund. Under the conditions of advanced economies, the classical bank products, such as the term deposit or account, are only able to generate a yield corresponding to the level of inflation. Thus, they only serve to maintain the real value of money, and not to generate real yield. In some cases they even do not cover the inflation rate, meaning that the real value of money on a classical bank account decreases.
Please note: There are risks associated with investing into mutual funds. The value of an investment can rise or fall and you may not receive back the amount invested.
In case of investment in a single particular security, there is such a possibility. On the other hand, it is just the investment portfolio, in which the particular fund invests, that represents the instrument to eliminate such risk. Most of the shares in which the funds invest are shares of big global companies, where the bankruptcy risk is lower than in small, start-up companies. Thus, if the fund value should fall to zero, then the value of all shares in the portfolio would have to be zero, which is very difficult to imagine and virtually impossible.
No. In addition to the asset manager (renowned asset management companies watching their image and reputation in the case of SFM World Funds), another supervisory body is also responsible for asset allocations, known as ‘the depositary’. The depositary checks each single investment order submitted by the asset manager whether it is in compliance with what is claimed in the fund prospectus. In this way, it cannot happen that the asset manager would purchase something that would not be in compliance with the prospectus, or that; for instance, shares would appear in a bond portfolio. If that happened, the depositary is accountable.
Only long-term investment can generate stable yields. By long-term investment, the client develops his/her financial basis for the future. By long-term investment, the client eliminates the short-term fluctuations on the financial market, and thus, he/she can also invest in more risky asset types (funds) with a higher yield potential. Moreover, this method enables to profit from compound interest – also referred to as yield from the yield.
