Growth & Jobs | Unlock your financial goals with a mutual fund

Mutual funds serve the needs of investors who want to spread their investment risks across a wider class of securities, says financial commentator Orville Johnson.

“Small investors have a special advantage as they can get shares in assets they would not normally acquire and get better returns,” Johnson said. “They also get the benefit of expert investment managers with the training to make sound judgements about portfolio mixes and the timing of purchase and sales of assets.”

He added that large-scale investors will also buy into funds if they don’t have the time to do their own research or determine when to buy and sell investments.

“If your financial goal is to educate your child, buy a house, or set aside funds for retirement, a portfolio of investments can be developed for you,” Johnson said. “This gives you greater control over your financial affairs.”

Mutual funds and unit trusts use the pooled savings of their investors to purchase stocks, bonds, real estate, money market instruments, and other assets, he stated. Specific funds have different asset mixes, allowing asset managers to develop portfolios suitable for the level of risk their potential investors are willing to accept.

Stacy-Ann Tait, head of asset management at JN Fund Managers Limited, pointed out that investing in mutual funds allows average investors to overcome minimum investment thresholds that would otherwise prevent them from taking advantage of certain investment opportunities.

MINIMUM INVESTMENTS

“At the point when JN Fund Managers launched its five original mutual funds in 2016, its Local Money Market Fund required an initial investment of $10,000,” Tait said. “The minimum investment for retail repurchase agreements was $1 million, but our mutual fund clients were able to take on these repurchase agreements by the pooling of their funds.”

The Global Money Market Fund has a minimum investment threshold of US$1,000, and the Global Fixed Income Fund has a US$10,000 minimum threshold. Meanwhile, the Global Fixed Income, Global Diversified Income, and Global Equity funds each have a minimum initial investment amount of $50,000.

“These funds give investors the flexibility to invest in United States dollar-denominated portfolios and/or Jamaican dollar-denominated ones,” she said. “This currency option provides another form of risk diversification.”

“Mutual funds provide a means to balance risk and can also provide attractive returns,” she declared. “Our Global Equity Fund had a 37.56 per cent return for the seven-and-a-half-month period ended August 21.”

She explained that this was the second-best performance among the equity-class mutual funds and unit trusts in Jamaica. The Jamaican dollar-denominated Global Fixed Income Fund was the top performer in its category, providing a 4.40 per cent return, also for the seven-and-a-half-month period ended August 21.

“Investors should be aware that the fees charged by fund managers can significantly impact the returns they receive,” Tait said. “That is the reason why JN Fund Managers charges the lowest fees among our competitors. My advice is that you should carefully consider what your financial goals are against what competing funds have to offer you.”