If you’re searching for a safer option than stock investing, yet with a higher return than depositing in a bank, you might want to consider mutual funds
Read more: What are mutual funds?
Superior returns compared to bank savings
The interest rates for bank deposits are approximately 5-8% per year, while investing in mutual funds can yield higher returns. For instance, VinaCapital’s VESAF fund has averaged an annual return of 32.4% over the past three years (as of March 31, 2023).
Lower risk than direct stock investing
Leveraging the experience and abilities of experts to mitigate risks
For financial experts, their daily routine involves observing, analyzing, and investing. Hence, if you purchase a mutual fund and allow the experts to invest on your behalf, your risk level will naturally be lower than if you invested on your own.
In 2022, when the Vn-Index fell sharply by 32.8%, individual investors without deep market knowledge could have suffered significant losses. However, if they chose to invest in VinaCapital’s VEOF fund, the fund’s experts managed to limit the decrease to just 21.2%.
| Year | 2022 | 2021 | 2020 |
|---|---|---|---|
|
VEOD (VND) |
-21,2% |
56,5% |
16,1% |
|
VN INDEX (VND) |
-32,8% |
35,7% |
14,9% |
The performance of the VINACAPITAL-VEOF fund and the VN INDEX over the years 2022, 2021, and 2020.
Mutual funds help you diversify your investment portfolio, thereby reducing risks
The rule of “not putting all your eggs in one basket” isn’t just advice but an effective investment strategy.
Investment funds like VINACAPITAL-VESAF diversify their risks by investing in a variety of stocks. Specifically, this fund has invested in 23 medium and small cap listed companies (as of March 31, 2023).
For individual investors, researching and tracking 23 stocks is a time-consuming and labor-intensive task, requiring evaluation and analysis before making buy-sell decisions. But for investment funds, this task is much easier.
Although mutual funds offer many benefits, it's important to note that they aren't always suitable for everyone.
You don’t accept risks from the stock market:
- Although when buying mutual funds, experts will invest on your behalf, the nature of mutual funds is still a method of investing in the stock market.
- This means that if the overall stock market goes down, the value of the mutual fund can also decrease.
You expect quick returns:
- “Regular long-term investment” applies not only to self-investment but also to mutual funds.
- If you invest in mutual funds hoping to earn a return after a short period of 2-3 months, you might be disappointed. It’s difficult to achieve high returns over a short time span.
In summary, mutual funds are an attractive investment option. They are not only safer than investing directly in stocks but also yield higher returns compared to bank savings.
However, investing in mutual funds still carries the risk of losses, and if you expect high returns within 2-3 months, it won’t be a good choice for you.
Buy VinaCapital fund certificates right on Timo digital bank’s app. Invest anytime with just 100,000 VND.
