Laxmi Capital Market Limited is issuing its second mutual fund scheme – Laxmi Equity Fund, worth Rs 1 arba from tomorrow. It is issuing 10 crore units for a price of Rs 10 per unit. Interested investors can apply for a minimum of 100 units (Rs 1,000) and they can apply for up to 1 crore units (up to Rs 10 crore).
For investors seeking to enter the stock market, mutual funds can be the best option. Here are some facts about mutual funds and how they can be beneficial to investors.
Mutual Fund is a collection of small funds with one objective – maximization of return with minimization of risk
Mutual Fund is a pool of fund generally of several small investors. The collected fund is then invested in financial instruments such as Stocks, Bond/Debentures, Govt. Securities, and Fixed Deposits (as prescribed by Mutual Fund Regulation, 2067). Such investment decisions are made by a Fund Manager. Returns from the investment are shared proportionately among the investors on the basis of the units held by them.
Currently, there are a
total of 10 mutual funds already in the market. Mutual Fund in Nepal is regulated by Securities Board of Nepal (SEBON). The fund is issued, supervised and managed only by entities/individuals fulfilling the criteria led in Mutual Fund Regulation, 2067 and as authorized by SEBON. Mutual Funds offer many benefits to investors. Let us analyze some major reasons to invest in mutual fund schemes.
Returns from mutual funds beats inflation
Mutual Funds help investors generate better inflation-adjusted returns without spending a lot of time and energy on it. While most people consider letting their savings ‘grow’ in a bank, they don’t consider that inflation may be reducing its value.
In the context of Nepal, average return of mutual funds is 15 percent whereas fixed deposit offers 12 percent annual return and inflation rate is 3 percent in Falgun 2073 end. Compared to fixed deposit rate and inflation rate, mutual funds are ahead of both rates, so it is better to invest in mutual funds.
Dividends provided by mutual funds in FY 2072/73
| Mutual Fund |
Cash Dividend% |
| Nabil Balanced Fund-1 |
30 |
| Siddhartha Investment Growth Scheme-1 |
30 |
| Laxmi Value Fund-1 |
25 |
| NMB Sulav Investment Fund-1 |
20 |
| Siddhartha Equity Oriented Scheme |
16 |
| NIBL Sambriddhi Fund-1 |
15 |
Mutual Funds provide an ideal investment option to place your savings for a long-term inflation adjusted growth so that the purchasing power of your hard earned money does not plunge over the years.
Professional Management
Mutual Funds do not require a great deal of time or knowledge from the investor because they are managed by professional fund managers. Also, they are guided by experts. team of managers, researchers and analysts who continuously research, select, trade and monitor performance of the securities the funds invest in.
No Large Investment Compulsory
For someone with just a few thousand to invest, building and managing a portfolio could potentially be highly impractical. Mutual Fund is the best option for those investors who are willing to invest in stock market but lack knowledge about it. It is also a best investment alternative for these type of investor. It is a good decision to invest in mutual fund than to save in Banks and Financial Institutions (BFIs). Most stock options require significant capital, which may not be possible for young investors who are just starting out. Mutual Funds allow them to make an investment, even if you have a very small amount to invest. Minimum amount needed for investing in mutual fund is Rs 1,000 which comprises of 100 units at Rs 10 per unit.
Government Preference
The Government policies continuously support mutual funds through various incentives such as tax breaks. The Government of Nepal has promoted mutual funds by waiving tax on capital gain and interest income generated by investments of the mutual funds. This waiver of taxes guarantees increased returns as compared to if an individual made the same kind of investment. The government has also made mandatory provisions to allocate 5% of the total Initial Public Offering (IPO) to mutual funds.
Liquidity
“Liquidity” refers to the extent to which the fund’s holdings can be quickly converted to cash. The units of the mutual funds are listed securities in Nepal Stock Exchange Limited which can be easily traded or pledged for liquidity.
Reduced Market Risk
In present context of Nepal, investors are becoming more aware about mutual fund schemes. Large units of mutual fund are being traded on NEPSE. However, mutual funds are not risk-free as they also invest in stock market. Since Nepali stock market is especially volatile and susceptible to political rumors, it is also necessary to understand about market twist before investing in mutual fund.
However, since mutual funds do not invest 100% of their fund in stock market, the risk is greatly reduced as compared to someone who only invests in equities. As per the prospectus of Laxmi Equity Fund, it plans to invest 8.10% of the fund in fixed income instruments, 81.40% in stock market and 10.50% in incomes at short call.
Laxmi Equity Fund has projected 8% return in the first year, 12% return in the second year, 15% in the third year, up to 23% return in the 7
th year.
How to apply for Laxmi Equity Fund?
Interested investors can collect application forms from Laxmi Capital Market Limited, New Baneshwor, Kathmandu and all branches of Laxmi Bank in Nepal. Investors can also apply from ASBA-approved banks and financial institutions from all 75 districts in Nepal.
Applicants should apply for a minimum of 100 units and for a maximum of 1 crore units at a price of Rs 10 per unit.
