Category : Guides , Investing

Common Mutual Fund Terms Explained In Simple English

Common Mutual Fund Terms Explained In Simple English

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 the 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 being 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.
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You can take a simple risk assessment and get started here.

 

To better explain these mutual fund terms, we made this video for you.

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18 Comments

  • Avatar

    Okoh Emmanuel Reply

    11:11 am . January 1, 2020

    How can I collect my money back once is mature

    • Ope

      Ope Reply

      8:50 am . February 6, 2020

      You sell the units.

  • Avatar

    Okoh Emmanuel Reply

    11:12 am . January 1, 2020

    How can I collect my money back once is mature.on mutual benefit

  • Avatar

    diana Reply

    5:50 pm . January 23, 2020

    there is a sell option …or am I wrong?

    • Ope

      Ope Reply

      8:46 am . February 6, 2020

      Yes, there is

  • Avatar

    Daniel Alex Odiba Reply

    6:40 pm . January 23, 2020

    What a great teaching today Mr. Ope. Thank you sir. Please, i plead for more of these teachings

  • Avatar

    Debbie Reply

    8:27 am . January 24, 2020

    Well explained, well understood

  • Avatar

    Adeshina Reply

    12:06 pm . January 24, 2020

    Thanks for teaching Mr ope

  • Avatar

    Michael Ugochukwu Reply

    3:20 pm . January 24, 2020

    Good and straight to the point.

  • Avatar

    Obanye ifeoma Reply

    7:58 pm . January 24, 2020

    Teaching is in-born in you; keep it up.

  • Avatar

    Busola Reply

    12:28 am . January 25, 2020

    How can I turn my daily savings to investment for Mutual funds

    • Ope

      Ope Reply

      8:45 am . February 6, 2020

      Once they mature, you can transfer them to mutual funds.

  • Avatar

    Olajumokemi Reply

    7:23 am . January 28, 2020

    I always love your teaching… Can’t wait for another 😘🤩😍

  • Avatar

    Ita Reply

    2:12 pm . February 2, 2020

    Very much thanks for this update. But please put me to light in a situation you are to contribute a fixed amount to run for let’s say three years and along the line one is not able to make it to the end due to unforseen circumstances after a period of say five months. What will happen to his contribution?

    • Ope

      Ope Reply

      8:44 am . February 6, 2020

      It will keep earning.

  • Avatar

    Ola Reply

    7:48 pm . February 7, 2020

    What about me that I invest with #1000,and I cash back with dat 1000,which kind of invest is that

  • Avatar

    Olubayo Tunmise Reply

    8:44 am . March 16, 2020

    This is insightful and i like the pizza explanation thingy. Is mutual fund risk free or there is any chance of default?

    • Ope

      Ope Reply

      6:13 pm . March 19, 2020

      Thanks for your kind words. There varying risk levels for mutual funds. On Cowrywise, we have hem categorized from low-risk to high-risk. To find your best fit, we’ll take you through a short risk assessment.

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