NAV is the fund's net asset value.
What assets mean is clear. These are the instruments in which the fund's funds are invested (stocks, bonds, currencies). What does the word “pure” mean?
In this case, this means that from the total capital (assets) those costs incurred by the shareholder, those funds that go to servicing investments and remuneration of the management company are deducted:
Depository fee
- registrar fee
- manager's remuneration.
A large NAV means the popularity of the fund, the fact that many shareholders have entrusted money to it (or several large investors) and this indirectly speaks of the reliability of the company and the profitability of the mutual fund. However, not everything is so clear here:
Large capital is more difficult to manage
- for large volumes of funds it is not always possible to find a seller of assets (stocks, bonds) at a favorable price.
- large volumes can lead to dissipation of investments and excessive diversification
Perhaps it makes sense when choosing a mutual fund to stick to the golden mean - mutual funds with a NAV of 100 - 300 million rubles. But buying shares with a small NAV is a step that requires a balanced approach: you need to understand that an excessively small size of assets leads to increased relative costs for the depository, registrar, etc.
Let’s say the registrar has a fixed service fee: 100,000 rubles. Which fund will give them away more painlessly for its shareholders - with a NAV of 10 million or 100?
Likewise, a small NAV may result in a higher percentage of the manager's remuneration.
Happy investment!
Fund's net asset value(NAV) is the value of the fund's assets under management. It is defined as the difference between the value of assets and the value of the fund's liabilities - that is, upcoming payments for services provided to the fund.
As of the summer of 2011, according to the National Association of Managers, the total NAV of all Russian mutual funds exceeds 450 billion rubles, with more than 100 billion being open-end mutual funds, only 22 billion being interval funds, and the remaining almost 330 billion being closed-end funds.
The NAV is calculated on the basis of the Regulations on the procedure and terms for determining the value of the net assets of joint-stock investment funds, the value of the net assets of mutual investment funds, the estimated value of investment shares of mutual investment funds, as well as the value of the net assets of joint-stock investment funds per share, introduced by the Order of the Federal Service on stock markets No. 05-21/pz-n dated June 15, 2005.
According to this document, the fund establishes its own procedure for assessing assets at the level of its internal documents, but within the framework of the regulations.
In this case, the value of assets is determined as follows. For securities traded on exchanges, the weighted average price of the last ten transactions before the close of the exchange on the day of assessment is taken. If fewer than ten transactions were made, the price of previous trades is taken into account.
For those assets that do not have sufficient liquidity, an independent assessment is carried out. Late payments, as well as debt of organizations that have been declared bankrupt, are not taken into account.
The main obligations of the investment fund consist of reserves for payment of services of a specialized depository, registry holder, auditor, independent appraiser and the investment company itself for asset management. In order to find out the size of such reserves on the date of determining the value of the share, a rule has been established according to which for open-end funds the number of days from the beginning of the year is taken, divided by 365 and multiplied by the cost of the services provided. For closed-end funds, the calculation is based on 1/12 of the cost of annual maintenance for each month that has passed since the beginning of the year.
The leaders in terms of NAV are the Uralsib Fund First fund (Uralsib Management Company) - more than 9 billion rubles, as well as the Dobrynya Nikitich and Ilya Muromets funds (Troika Dialog Management Company) - 6.4 billion and 5.6 billion respectively. Mixed investment fund "Small Business of Moscow" (Management Company "Aton Management") - 5 billion, open-end fund of shares "Petr Stolypin" (OFG Invest) - 4.8 billion rubles.
A mutual fund is a unique form of collective investment of funds with subsequent receipt of profit. The funds of many investors are pooled into a single fund and some assets are purchased with it. They are bonds, shares, deposits, real estate, that is, the standard gentleman's set of financial instruments permitted by law. The activities of the fund's employees are aimed at obtaining maximum profit using the funds received under management, so that the fund's assets increase and shareholders can receive the profit they are entitled to.
Pros of a mutual fund
Starting capital may be small. Some funds are ready to accept a contribution in the amount of one thousand rubles. You don't have to study the market on your own. This is already being done by specially trained people working in the fund.
How it works
Not any organization, much less can create a mutual fund. This is a licensed activity. The license is issued by the Federal Service, which is responsible for control over the financial markets of the Russian Federation. This body both issues a license and controls the subsequent activities of the mutual fund. The inspection takes place at least once every three years. That is why the fund must conduct all operations correctly and work within the framework of the law.
As soon as a license is obtained, the fund can begin to attract investors (shareholders). These can be both citizens and organizations. Each person can buy shares for a certain amount of funds, and this amount is at the disposal of the managers. The fund, with the money of investors, can buy securities that are in free circulation and, by making such transactions, receives a profit, which leads to an increase in the value of the fund’s assets, which means the value of the shares increases.
Pai - what is it?
An investment share is a registered unit that records the fact that the investor has invested a certain amount of money in the fund. In other words, the investor thus fixes his own right to a share of the mutual fund’s property. Documentary ownership is formalized through an entry on the depositor’s personal account, which is opened in the mutual fund register. The number of shares an investor will own will likely be a fraction.
Change in unit value
The value of shares, like the value of any other asset, is subject to investment risks. The share does not have a nominal price, but its estimated value is calculated at certain intervals. Thus, open-end mutual funds calculate the price of the unit every working day (on holidays and weekends the cost is equal to the price for the last working day).
An interval mutual fund does this on the last day of the interval (the period when you can redeem and purchase shares) and the last working day of the month. Closed-end mutual funds calculate the cost on the last working day of the month and the day following the last day for submitting applications for the purchase of additional shares. All transactions for the purchase/sale of shares of this fund are carried out based on their price on the last day when applications were accepted.
The value of the shares is calculated simply: the price of the mutual fund's net assets (NAV) is divided by the number of shares. Information about them can be viewed in the register of fund investors. The net assets of a mutual fund are determined by deducting the amount of the fund's liabilities from its assets (funds in the fund's deposits and accounts).
Profitability Guarantee
There is no guaranteed return on mutual funds, like other financial instruments. Everything is determined by the amount of supply and demand for stock assets. And mutual funds cannot provide guaranteed returns. Moreover, the information about the mutual fund cannot provide any guarantees regarding the profitability of the management company’s work in the future. This is described in more detail in Article 51 of the Federal Law “On Investment Funds”. However, the future investor must understand that only low-yield instruments, such as bonds, can guarantee profit. You just need to minimize the risks at the selection stage, and then the profitability of mutual funds will help increase your funds.
How is profit generated in the fund?
If an investor decided to invest one hundred thousand rubles in the fund, and the cost of one share at that moment was four thousand rubles, then he will be able to purchase twenty-five shares. Let’s say that after some time the fund’s assets have risen in price, and the cost of one share begins to equal six thousand rubles. The cost of all shares acquired by the investor in this case began to be one hundred fifty thousand rubles. So he was able to earn fifty thousand rubles without taking into account commissions and taxes. This is how each of the shareholders can receive their profit using mutual fund shares.
Rules for successful investing
The essence of the rules is simple. You should invest for the long term. A mutual fund is a long-term investment instrument (from two years). Therefore, all invested funds should lie quietly for the next two to three years and generate profit. Such investing is good because it is not affected by short-term fluctuations to which the stock market is so susceptible. This provides a higher level of profitability.
This also leads to the second rule: you should invest free funds that will not be needed in the near future. Investments for a short period of time are possible and, perhaps, even profitable. But this approach does not guarantee income from each investment in a mutual fund. You should invest in reliable mutual funds, reviews and ratings of which indicate the possibility of making a profit.
Rating of mutual funds
It is not difficult to obtain information about the performance of a particular fund. It is in the public domain. But when studying it, it is worth considering a number of points.
- What is the rating of the management company in terms of the volume of funds raised over the last year? Two years? Three? When studying the rating of mutual funds, you should understand that the investor invests funds for a long period of time, and the security of the investment and the success of the investment will depend on the ability of the management company to manage investors’ funds.
- What is the management company's net asset value rating? This value indicates how much funds of fund participants are managed by this management company. And the higher it is, the higher the popularity of the management company, and therefore the greater the trust in it.
- What is the rating of mutual funds by the volume of funds raised? It is better to check this indicator for a year and for three years.
- What is the mutual fund's rating based on net asset value?
- What is the mutual fund's profitability rating? It is this rating that attracts the attention of investors in the first place. This indicator ranks funds according to the amount of profitability they were able to achieve over a certain period of time. For example, the management of Sberbank mutual funds led to the fact that the Sberbank - Global Internet fund produced a return for the year of 49.91%.
How to buy shares?
There is nothing complicated here. It is enough to be in the office of the management company or contact its intermediary. The role of intermediary is often played by investment companies or banks. There you will be asked to fill out and sign the following documents:
- Application for opening a personal account. When a management company has several funds, and the investor decides to make contributions to more than one fund of this company, then accounts must be opened for each contribution.
- Registered person's profile.
- Application for the purchase of investment shares.
All documents are drawn up and signed in triplicate, and when working with an intermediary - in four. Of course, there is a bit of hassle with the papers. After a couple of days, the management company will receive an order to purchase shares with all the details.
Sale of shares
This action is similar to purchasing. You will also have to visit the office of the management company and write a statement, in this case about repayment. Usually, only a passport is required from the documents, but information about the number of shares owned by the investor and the personal account number are sometimes required. Therefore, it is better to go with a full package of documents.
It is worth remembering that sales and purchases from different mutual funds are carried out in different ways, or rather, at different times. Open-end funds, which are the majority, will allow the investor to sell on any business day, interval - at the time the interval opens, closed - when a mutual investment fund is formed or additional shares are placed. But there may be exceptions.
Sales and purchases of shares using a broker
Transactions with shares through a broker have their advantages.
- The purchase of shares of closed-end and interval funds is possible on any day when the exchange is open.
- It is possible to avoid premiums when purchasing and discounts when selling shares.
- Speed of execution of an investor's request.
- There is no need to get to the management company's office.
However, there are also disadvantages. Not every mutual fund lists its shares on an exchange. Promstroybank, Metropol, Interfin Capital, Uralsib are examples of management companies listed on the stock exchange. Sberbank Asset Management, whose mutual funds are listed on the stock exchange, is also one of the largest management companies. Such shares do not have the highest liquidity and therefore the spread will be high. Instead of premiums and discounts, there will be commissions for the exchange and the broker (even if they are several times lower), as well as a fee, although not always, for depository services.
Mutual Fund. Banks
Many banks offer the “Deposit plus Mutual Fund” service. Thus, when placing funds, the investor places part of them at interest in the form of a deposit, and the rest is used to purchase shares of mutual investment funds managed by the management company of the same bank. Whether this is good or bad depends on the work of the management company. After all, if it performs well, the return on the shares will exceed the interest on the deposit, which, of course, will bring joy to the investor. Otherwise, the investor will regret the lost profit that he could have received when he placed all his available funds in the form of a deposit with interest.
Taxation
You will only have to pay when the shares are redeemed. And this is the only payment that needs to be “gifted” to your favorite tax office. Profit is easy to calculate - it is the difference between the current value of shares and the cost of purchasing them. Typically, the calculation and withholding of this tax from individuals is the responsibility of the management company. This means that the investor does not have to fill out a tax return on his own. For residents the tax will be 13 percent, for non-residents - 30 percent.
Shareholder expenses
There are two main types of commissions practiced in mutual funds.
- A commission that increases the cost of a share upon purchase (purchase premium). It should not exceed one and a half percent of the estimated value of one share. Some management companies do not charge it at all.
- A commission that reduces the price of a share upon sale (sale discount). It should not exceed three percent of the estimated cost.
Remunerations for the management company, appraiser, auditor, registrar, depository also belong to the expenses column. But they all lie within a few percent and are taken into account when calculating the value of shares.
Main players
- Uralsib. Mutual funds: “Uralsib First”, “Uralsib Perspective Investments”, “Uralsib Eurobonds”, “Uralsib Financial Sector”, etc. Recently, there have been few positive reviews about Uralsib funds, and all of them are concentrated on non-core forums. The Uralsib management company, whose mutual funds initially showed very good returns, is now being sharply criticized by investors. Many investors believe that they could achieve much better results in terms of profitability on their own.
- VTB mutual funds: “VTB - Eurobond Fund”, “VTB - Stock Fund”, “VTB - Balanced Fund”, “VTB - MICEX Index”, “VTB - Telecommunications Fund”, etc. VTB funds vary in profitability, but many complaints are received for customer service. Therefore, when considering VTB mutual funds as an investment instrument, you need to be prepared for this.
- Sberbank's main management company is Sberbank Asset Management. Mutual Funds: “Sberbank - Natural Resources”, “Sberbank - Financial Sector”, “Sberbank - Europe”, “Sberbank - America”, “Sberbank - Gold”, etc. This management company has proven itself to be reliable, which is not surprising.
A few questions about mutual funds
Is it possible to donate shares? Yes, it's possible. It is enough to conclude a standard agreement in ordinary written form.
Can shares be inherited? Yes, they can, in general order. The Civil Code of the Russian Federation describes in detail how this is done.
Conclusion
So, mutual funds are a great way to invest and increase your funds. The main thing is to choose a worthy fund. When comparing a mutual fund and how to invest, a novice investor should choose the first option. After all, in addition to the advantages described above, there are additional ones:
- You can invest a small amount of money and get the benefits of the most profitable instruments (index portfolio, real estate and others).
- An investor, when investing money in mutual funds, trusts management to professionals (in this regard, a fund is similar to trust management).
- Although investing in a mutual fund does not allow you to use all the opportunities of the securities market yourself, the investor frees up his time for other things. And this, you see, is also a huge plus.
In other words, if an investor does not like to deal with all the intricacies of the securities market, but wants to invest money, then investment mutual funds are exactly the tool that will allow not only to preserve, but also to increase savings.
When investing in any instrument, the first question that arises is the safety of funds and non-trading risks. The only monetary guarantee in Russia is provided by banks; Thanks to the deposit insurance agency DIA, bank deposits are still the most popular option for storing funds among Russians. Mutual funds do not have such a guarantee, but they have a multi-stage risk control system, which, although it does not completely eliminate fraud, still puts this instrument on par with large brokers in terms of reliability. If a management company goes bankrupt, its assets should simply be transferred to another similar company, where they can be sold if desired. I have not come across any cases where investors’ assets were lost due to the bankruptcy of a mutual fund - mutual funds even survived the crisis of 1998, when many Russian banks went bankrupt. How does a mutual fund work?
Firstly, it can be immediately noted that According to the law, a mutual fund is not a legal entity , but a “property complex” (by the way, this is why the fund itself does not pay income tax) - the storage and management of funds is carried out in it by different companies. The fund's securities are accounted for in a special department - a specialized depository, which stores and controls all transactions with the fund's funds. Any purchase and sale of securities is certified by the signature of both the head of the company and the depository employee.
Management Company (the “brain” of the mutual fund) responds with its property for any violation of the fund’s rules, the depository blocks all suspicious transactions. Property appraisals are usually carried out by a third-party appraiser. At the same time, the property of the fund is special. The depositary cannot dispose of it, but only carries out its accounting plus control of the company. The depositary also determines the value and number of fund shares.
Another mutual fund participant - specialized registrar — takes into account the rights of shareholders to a share of property in a mutual fund using a register. All information about the owners of investment units and the number of units owned by them is recorded there, as well as information about the total number of issued and redeemed investment units, their acquisition, exchange or transfer. The correctness of accounting and reporting of the management company is checked by the auditor.
Thus, five organizations participate in the work of the mutual fund, which ensures the reliability of its work. Moreover, management companies, special depositories and special registrars have licenses from the Central Bank of Russia, and auditors have licenses from the Ministry of Finance. The principle of the mutual fund structure can be described by the following diagram:
If you are purchasing investment fund units for the first time in the office (a personal account has not yet been opened in your name in the register of investment unit owners), you must fill out an application for opening an account and a registered person questionnaire. When purchasing online, an account on the State Services portal is usually required.
Payment for investment units occurs by transferring funds from the current account specified by you in the application, to transit account details the fund management company you need. Within five days, this company must transfer the funds to the account of the selected mutual fund.
Thus, you do not become the owner of the fund's shares instantly (as when purchasing shares on the stock exchange), but on the day the funds are received into the mutual fund's account or on the next business day. The specialized registrar must send you confirmation of the transaction in the register of owners of investment units of the fund.
What is a share? Purchase and sale of shares
Share is one of the basic concepts of a mutual fund, so it will be useful to get to know it in more detail. According to the definition, ″ investment share is a registered security certifying its owner’s share in the ownership of the property constituting the mutual investment fund. At the same time, the investment share itself does not have a nominal value, and the number of investment shares per owner can be expressed as a fraction. In mutual funds, in addition to the concept of a share, there is another important indicator - net asset value (NAV) . NAV is calculated as the value of all fund assets (securities, deposits, cash, accounts receivable) minus accounts payable and reserves for future expenses and payments. Knowing the NAV, you can calculate the estimated value of the share:
Estimated share value = NAV / Number of shares
Consequently, the value of the fund's assets changes under the influence of two factors - depending on how shareholders deposit and withdraw money from the fund, and on how the market value of securities in the fund's portfolio changes. But the estimated value of the share depends only on one of these factors - changes in the market value of securities as part of the fund's portfolio, since the number of units in an open-ended and interval fund may change.
In simpler terms: when a new investor comes to an open-ended fund, the fund issues new shares. At this moment, a certain number of shares is recorded in the shareholder’s account, which is determined by dividing the amount of funds contributed by the shareholder by the estimated value of the share on the day the entry was made in the register. At the same time, NAV increases in proportion to the growth of shares. When an investor leaves the fund, the shares he previously purchased are redeemed (repurchased) by the fund - i.e. there is a reduction in the number of shares, compensated by a decrease in NAV. What is the conclusion from this? An open-end fund could face a significant loss if there is a massive exodus of clients. Dividends on securities in the fund's portfolio are not paid (reinvested) and are added to the total result. The investor pays standard income tax (13%) only when selling shares.
low entry threshold (from 100 rubles);
strict control and relatively high investment security;
potential income is higher than a bank deposit;
assets may include not only the Russian market - a quarter of open mutual funds have foreign securities;
There are also fully currency mutual funds that buy exchange-traded funds ETFs;
the previous two points imply additional income from the devaluation of the ruble;
Mutual funds are relatively transparent: information on the structure of assets is published once a quarter;
The management company is a tax agent, a 13% tax is paid only when the share is redeemed;
relatively large selection of funds and areas
income may not only be lower than a bank deposit, but also be negative for several years;
Mutual funds lose when shares fall and can only partially transfer them to more conservative assets (if provided for in the structure of the management company);
To purchase a mutual fund, you need to enter into an agreement with the management company, for which you usually need to visit its office. Likewise when terminating the contract;
the commissions of many funds are quite high - about 2-6%; when purchasing shares, a premium is paid on average from 0 to 1.5% of the value of the share. If you hold the share for a short time, you will have to pay up to a 3% discount when selling;
only real estate mutual funds with high spreads are traded on the Moscow Exchange (with very few exceptions);
