Do mutual fund terms still confuse you? Let’s help. This article explains some common mutual fund terms in simple English.
Mutual Funds ?
Let’s start from the beginning, right? A mutual fund is similar to gathering funds to buy a box of pizza from a chef. Mutual funds pool money from various small investors to make massive investments at once.
The Fund Manager ???
The fund manager is like the chef who you trust with your money to make a great pizza. After pooling the money together, he goes around to source the right materials to make a great pizza. In essence, the fund manager is the professional who oversees the money invested in a mutual fund; to make sure it earns more money.
The Trustee ??⚖️
To ensure the chef does things right, you need someone to monitor that he delivers the exact pizza he promised. So, a supervisor steps in. That’s exactly what the trustee does. Trustees ensure that fund managers invest your money rightly and earn you correct returns.
The Registrar ???
Now, what if the pizza gets ready and the chef claims you didn’t pay him? Well, that will be impossible if you had a legitimate receipt right? A registrar, in the case of a mutual fund, provides you with that receipt.
Mutual Fund Types ???
Just as you have various pizza types, you have mutual fund types. The common ones are equity funds, fixed-income funds, and balanced funds. Equity funds invest your money in shares of high-flying companies that are carefully selected. While fixed-income funds invest in low-risk investments that are backed by a promise - government debt for instance; in which the government borrows x and agrees to pay back with a certain percentage. Finally, balanced funds. As the name suggests, they mix the earlier options.
Risk Assessment ??♀️
Moving on, every good chef should understand how much spice you can handle before making your pizza, right? So, they ask and craft something in line with that. We at Cowrywise are good chefs also. Before you invest in any fund, we take you through a spice test (risk assessment). Based on the results, we suggest the best-fit funds for you. Equity mutual funds are very spicy, that is they are for high-risk investors. On the other hand, fixed-income funds are a little bit spicy, while balanced funds are moderately spicy.
You can take a simple risk assessment and Get started.
To better explain these mutual fund terms, we made this video for you.
Good evening, can I get an explicit illustration of how much to invest, how much is the interest rate and for how many days or duration to earn such interest.
Thank you in anticipation of your response.
Ibrahim Muhammad T.
Hi Ibrahim,
You can invest any amount.
Mutual Funds work differently depending on the type you invest in, we have them categorized by risk level.
Please find out more here – http://cowrywise.com/mutual-funds
With conservative mutual funds, you earn based on annual interest. While with the other fund categories – moderate and aggressive – you earn based on capital gains.
There are no fixed interest rates as they change daily, depending on the performance of the market.
We advise you to invest for the long-term so that your investments can yield above-average returns over time.
I don’t recommend any one to invest in any mutual funds on Cowrywise because the interest rate is not even up to 1% it is extremely low. I invested 10000 naira and am getting 1naira everyday as ROI, So after 30days my total ROI would 30naira
is still better than keeping your money in the bank or how much do you think bank will give you?, this is not a quick rich scheme.
Hi Wilfred,
Thank you for your comment. However, this is inaccurate information.
Some funds were performing lower than usual due to market performance, however, not all funds were performing at 1%.
Some were much higher and please remember that we always advise thinking in the long-term.
Mutual Funds work differently depending on the type you invest in, we have them categorized by risk level.
If it’s a conservative fund, you earn based on interest. Interest rates for conservative funds are not fixed, it changes daily.
The other fund categories: moderate and aggressive earn based on capital gains which also changes daily.
This means that performance can be low today and high tomorrow.
If you’re investing for the long-term, more often than not, your investments will yield above-average returns despite the highs and lows of the market.
Good evening, please I need details of how I can invest and what is the interest rate. Also the duration of the investment.