Investing in open-end funds is one of the trending forms of making money today. Investors don't need a lot of capital, don't spend a lot of effort, still get significant profits. However, of course there will be risks and disadvantages of mutual funds that you should know to participate in this channel in the most effective way.
first.What is an open-end fund? Types of Open Funds
There is a form that is considered indirect securities investment, which is an investment in an open-ended fund. So what is that? What are the characteristics? Divided into how many types?
What is an open-end fund?
Open Fund Also known as Mutual Fund, is a form of indirect investment. Investors can contribute capital to open-ended funds, entrust fund management company. From there, experts will help investors make the investment.
Types of open-ended funds today
There are three types of open-ended funds on the market today:
1/ Fund to invest in stocks (share fund)
Equity funds, also known as open-ended funds, are divided into several categories depending on the fund's goals:
- Based on company size: large cap fund, mid cap fund and small cap fund.
- Based on industry or sector: divide assets to cover losses if any. Such as technology investment funds, oil and gas, aviation, healthcare, etc.
2/ Fixed income securities fund (bond-opening fund)
Stock Fund is the second most popular type of open-ended fund on the market. Here, investors will be paid interest and enjoy certain profits for capital. You don't have to buy stocks, but instead invest in debt.
These debts are issued by the government or business. Type bond investment fund With fixed income, it's safer than stock funds. However, at the same time, the growth potential of this fund is not high.
3/ Fund that invests in both stocks and bonds (balanced fund)
Balanced open-end funds are also known as asset allocation funds. This is the type open-ended financial investment fund combination of stocks and fixed securities. Investment rates vary by fund.
Balanced open-end funds offer higher return potential than bond funds. Another advantage is that it is also less risky than an open-ended fund.
2.The risks and disadvantages of open-end funds
Open-end fund investment is chosen by many people today with outstanding advantages. However, investors should know their risks and disadvantages to actively manage their finances in the most effective way.
Risks and disadvantages when investing in open-end funds
Investors should know that when participating in and investing in open-ended funds, you must accept the following disadvantages:
- Unable to decide on the details of his investment activities
- Profitability is not as high as other forms of investment
- Risks come from market fluctuations and from the company's side
An example of a case for you to better understand the limitations of open-end funds:
You go to the fund management company to register to participate in open-ended fund investment. Through research, you see there are potential stocks and want to invest. However, these stocks are not in the investment portfolio of the open-end fund.
Therefore, you cannot freely choose your favorite stocks to invest in in many situations. Returns from stocks in the portfolio are also not as high as expected.
Besides, the market fluctuates up and down, so investment in open-ended funds is also precarious. You are completely at risk of loss if the market is downtrend.
How to invest in open-ended funds to limit risks
To maximize the disadvantages and limit risks when investing in open-end funds, investors should refer to the following tips:
- Choose a reputable fund management company to invest in
- Research and choose open-ended funds with good profit potential
- Mastering how to manage capital in the process of participating in investment
- Know clearly about the investment projects that the open-ended fund you choose is aimed at
Investment steps to limit the risk of open-ended funds
To better understand, we will refer to a specific example of how an open-ended fund investment helps to limit the risks of an open-ended fund as well as how to overcome the limitations of this form of investment.
You are a businessman, have no small fortune. However, you still want to have more income from the idle capital. You go to an open-ended fund management company to benefit from the investment.
First of all, you need to know the business principles and market economic situation. Then you will proceed with the following steps to make an investment:
+ Step 1:
Find a reputable source of sharing information to choose the best fund management company for you. Should choose based on the following criteria: transparency in operation, a team of experienced experts.
+ Step 2:
Look for open-ended funds that have a diversified portfolio and match your taste. Portfolio proportions with good profitability are essential. At the same time, there must be a flexible investment strategy in line with market trends.
+ Step 3:
Plan your investment capital management by understanding the types of expenses the fund management company incurs. Specifically, such as annual management fee, bank supervision fee, income tax, transaction fee, etc.
+ Step 4:
Find out about open-fund projects, which projects are targeted at, have high profit potential, etc.
In addition, it is also important that you find out the real ability and reputation of the fund management company from the evaluation of past performance.
3.The best open-ended funds to invest in potential 2022
Are you a new investor? Faced with many choices, you do not know which is the right answer to invest in making the most reliable profit? Here are the top bright suggestions today.
Open-ended fund VCBF
VCBF is one of the joint venture companies with Vietcombank and Franklin Templeton Investments Group. This is the solution investors should choose to invest in open-ended funds because of the following advantages:
- Gathering the number 1 financial expert staff in Vietnam
- There are accurate market research results in the projects
- High profit potential due to extensive relationships with businesses
Manulife Open Fund
Manulife is managed by the insurance company of the same name, offering an attractive open-end fund. It is suitable for many different types of investors with 2 independent funds targeting middle-aged and young people.
Manulife Open Fund whose investment capital is managed by a professional company. So you can be assured of financial stability amid market fluctuations.
iFund . Open Fund
iFund is one of the open-ended funds in the Techcombank banking system. It includes bond funds, stocks, flexible bonds. With a wide range of investments and stable interest rates, iFund open-ended funds are chosen by many investors.
Some other advantages of iFund open-ended fund can be mentioned such as: flexible and safe withdrawal, high profit potential, professional management company.
Vinacapital Open Fund
The name Vinacapital is no longer strange to open-end fund investors in general. This brand is associated with diverse activities to help you liquidate your investment effectively and bring in attractive profits.
If you do not have a large capital, you can still fully invest in Vinacapital open-end fund. Investors only need from 2 million VND, interest rate up to 15%/year and many other benefits.
Vndirect Open Fund
Vndirect stock market with prestigious bond trading is interested by many investors. This is one of the leading stock brokerage companies in Vietnam.
Vndirect's open-end fund has diversified portfolios to choose from. Popular are bonds and stocks. In addition, it is very easy for investors to make transactions with only an amount from 100,000 VND.
4.Difference between open-end funds and ETFs
Open-ended funds and ETF are two investment channels that attract the attention of investors. They have certain similarities and differences.
Similarities of Open-ended Funds and ETFs
An ETF looks like a common stock and has the characteristics of an investment fund. It is also listed on the stock exchange. Compared with open-ended funds, ETFs share some characteristics as follows:
Regarding the form of investment:
- All operate in the form of investment of open-ended funds
- Investors can buy fund certificates from fund managers
- Products include many different asset classes
- Fund certificates are issued in unlimited quantity
- Allowing investors to resell fund certificates to fund management companies
+ About investment portfolio:
- Both funds allow investors to allocate money to invest in different portfolios
- Diversify investment portfolio to reduce financial risk
Difference between open-end fund and ETF
These two types of funds have different points for investors to distinguish:
| Open Fund | ETFs | |
| Manage skill | Proactive management of indexes by experts | Passive management by any indicator |
| Transaction | Not allowed to trade on the stock exchange, buy and sell through a fund manager | Listed and traded on the stock exchange |
| Investment | Low minimum capital required | There are no specific capital requirements |
| Fund expenses | Management fee is about 1-2%/year | Management fee is about 0.6 - 0.8%/year |
| Tax preferences | Paying income tax more often | Usually few transactions are taxed |
See more: What is a Crypto Investment Fund?
So choosing an open-ended fund or an ETF to invest is up to you to decide based on your evaluations to match your goals and conditions. If you feel these risks and disadvantages of open-end funds still does not affect the benefits from its plus points, it can be invested in.
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