Mutual funds are investment vehicles that pool money from many investors and invest it in a portfolio of stocks, bonds, and other securities. There are several types of mutual funds including money market funds, fixed income funds, equity funds, balanced funds, index funds, and specialty funds. Some benefits of investing in mutual funds include professional management, investment diversification, and liquidity. However, mutual funds also have disadvantages such as management fees, loss of control over investments, and potential for poor performance compared to market indexes.

1. Mutual Funds
and
Other
Investment
Companies
Chapter 4

2. Chika Esther
Wahyu
Bakary Rangga
Our
Teams.
.

3. Investment Companies
Investment companies are financial
intermediaries that take money
from individual investors and invest
it in a variety of securities and other
assets. Investment firms are based
on the concept of pooling assets.

4. Functi
on
Record and
keeping
transaction
Diversivicati
on and
Divisibility
Lower
Transaction
Profesional
Managemen
t

5. Type of
Investment
Company
Unit Investment Trust
are pools of money
invested in a portfolio that
is fixed for the life of the
fund.
Managed Investment Company
Two types:
a. Closed-end
b. Open-end
Other Investment
Organizations
Real Estate Investment
Trusts (RTITs)
Similar to closed-end funds;
invests in real estate loans.
Hedge
Private investment pools;
exempt from SEC regulation. It
can be speculative in nature.
Commingled Fund
Partnership of investment
pooling funds; designed for
trusts/larger retirement
accounts to get professional
management for a fee

6. Mutual Funds are pools of money collected from
many investors for the purpose of investing
in stocks, bonds, or other securities. Mutual
funds are owned by a group of investors and
managed by professionals.
How Mutual Funds Work
When you purchase a mutual fund, you are
pooling money with other investors. The money
pooled together by you and other investors are
managed by a fund manager who invests in
financial assets such as stocks, bonds, etc. The
mutual fund is managed on a daily basis. Below
is a diagram of how mutual funds work:
MUTUAL FUNDS

7. Common Types of Mutual Funds
1. Money Market Funds
Money market funds invest in short-term fixed-income securities. Examples of
short-term fixed-income securities would be government bonds, Treasury bills,
commercial paper, and certificates of deposit. These types of funds are
generally a safer investment but with a lower potential return than other mutual
funds.
2. Fixed Income Funds
Fixed income funds buy investments that pay a fixed rate of return. This type
of mutual fund focuses on getting returns coming into the fund primarily
through interest.
3. Equity Funds
Equity funds invest in stocks. Furthermore, there are different types of equity
funds such as funds that specialize in growth stocks, value stocks, large-cap
stocks, mid-cap stocks, small-cap stocks, or a combination of these stocks.
MUTUAL FUNDS

8. MUTUAL FUNDS
Common Types of Mutual Funds
4. Balanced Funds
Balanced funds invest in a mix of equities and fixed-income securities – typically
in a 40% equity 60% fixed income ratio. The aim of these funds is to generate
higher returns but also mitigate risk through fixed-income securities.
5. Index Funds
Index funds aim to track the performance of a specific index. For example, the
S&P, or TSX. Index funds follow the index and go up when the index goes up
and goes down when the index goes down. Index funds are popular as they
typically require a lower management fee compared to other funds (due to the
manager not needing to do as much research).
6. Specialty Funds
Specialty funds focus on a very small part of a market such as energy,
telecommunications, healthcare, industrials, etc.

9. MUTUAL FUNDS
Benefits of Investing in a Mutual Fund
1. Professional Management
Mutual funds are actively managed by a professional who constantly monitors the
fund’s portfolio. In addition, the manager can devote more time selecting
investments than a retail investor would.
2. Investment Diversification
Mutual funds allow for investment diversification. A mutual fund invests in several
asset classes and not just a single stock or bond.
3. Liquidity
Mutual funds possess high liquidity. In general, you are able to sell your mutual
funds within a short period of time if needed.

10. MUTUAL FUNDS
Disadvantages of a Mutual Fund
1. Management Fees and Operating Expenses
Mutual funds typically charge a high MER (management fee and operating
expenses). This would lower the overall return. For example, if the mutual fund
posted a 1-year return of 10%, the MER would lower this return.
2. Loss of Control
Since mutual funds are managed by a manager, there is a loss of control when
investing in a mutual fund. Remember that you are giving someone else your
money to manage to when investing in a mutual fund.
3. Poor Performance
Mutual fund returns are not guaranteed. In fact, according to research, a large
majority of mutual funds fail to beat major market indexes like the S&P 500. In
addition, mutual funds are not insured against losses.

11. Mutual funds are the common name for open-end investment
companies. This is the dominant investment company today,
accounting for more than 90% of investment company assets.
Assets under management in the U.S. mutual fund industry were
approximately $13.5 trillion in early 2013, and approximately
another $13 trillion was held in non-U.S. funds.

12. ifferent Type of Mutual Fund
Based on duration
Close-ended fund and d. open-ended fund
Bassed on asset managed
quity fund= growth fund, index fund, Debit fund,
Hybrid fund, Special fund

13. Investment Policies
Each mutual fund has a specified investment policy,
which is described in the fund’s prospectus. Equity Funds
Equity funds invest primarily in
stock, although they may, at
the portfolio manager’s
discretion, also hold fixed-
income or other types of
securities.
Setor Funds
Many funds have an international focus. Global
funds invest in
securities worldwide

14. Operational Expenses
Operating expenses are the costs incurred by the mutual fund
in operating the portfolio, including administrative expenses and advisory fees
paid to the investment manager. These expenses, usually expressed as a
percentage of total assets under management
Taxation of Income From Mutu
Funds
A mutual fund is an arrangement under which shares or units are sold to
raise capital. Investors pool their money with other investors, and a fund
manager invests the pooled money on their behalf.

15. How Income From a Mutual Fu
Taxed
Dividends are paid by companies in which your funds have
been invested by the fund scheme. The dividends are paid
when the company earns profits and decides to pay out
some part of it to the shareholders.
A capital gain, on the other hand, is the return earned by
selling mutual fund units at a price higher than the
purchase price.

16. Calculating capital gains/losses on the sale or
redemption of units or shares
When mutual fund units or shares are sold or redeemed, a capital gain
or capital loss may result. Currently, the capital gains inclusion rate in
Canada is 50%, meaning only 50% of realized capital gains are subject
to tax.
To calculate a capital gain (or loss) on the sale of an investment,
the following three amounts are required:
• Proceeds of disposition:
• Adjusted cost base (ACB)
• Outlays and expenses

17. EXCHANGE-TRADE
FUNDS
Exchange-Trade Fund (ETF) is portfolio investment products that are
admitted to listing or trading on a regulated exchange. An ETF provides
investors with exposure to a diversified basket of shares or other financial
products. ETFs aim to replicate the performance of a specific index; this
index can be a blue chip, a regional, or a sector index. ETF is similar with
mutual funds, but we can trade ETF in Stock Exchange.

18. EXCHANGE-TRADE
FUNDS
The differences between ETF and mutual funds:
Dealer Participant is Exchange's member who cooperate with ETF Investment Manager to sell and buy
ETF shares. In Indonesia, there is 6 (six) Dealer Participant, that is Bahana Sekuritas, Mandiri Sekuritas,
Philip Sekuritas, Sinarmas Sekuritas, Indopremier Sekuritas and Panin Sekuritas.

19. Evidence suggest some persistence in positive performance over certain
horizons
Mutual Fund
Investment Performancere
On average, mutual fund performance less than broad market performance

20. How to Evaluate the Performance of a
Mutual Fund ?
Define the Investment
Goals
Shortlist a few peer Funds
to compare
Fee Structure of the Fund
Check the historical
Performance Data
Risk-Adjusted Returns
Performance against
Index

21. Mutual Fund Investment Perfomance

22. Thank
You..