A mutual fund is a professionally-managed trust that pools the savings of its many investors and invests them in securities such as stocks, bonds, and short-term money market instruments. These funds are actively managed by professional fund managers in accordance with each fund’s objectives.
The funds are generally well diversified and offer an attractive way for savings to be managed without paying high fees or requiring constant attention from individual investors. Mutual funds present an option for investors who lack the time or knowledge to make traditional and complex investment decisions. By putting your money in a mutual fund, you allow the fund manager to make essential investment decisions for you.
The legal name of mutual funds in Pakistan is Collective Investment Schemes (CIS) . The ownership of the fund rests with the investors and the title of assets is with the trustee of the mutual fund. The Fund Manager (Asset Management Company) actively manages the placement of these assets in various securities. A mutual fund invests in securities based on the investment objective of a particular scheme which is clearly laid down in the Offering document for that scheme.
The fund adds value to the investment in two ways: Income earned and Capital Appreciation. This is shared between unit holders in proportion to the number of units they own.