Before opening an account: 4 things you need to understand about mutual funds

Getting Started with Investment in Mutual Funds by Choosing

Deciding to invest in mutual funds should not be rushed. It is essential to understand the fundamentals well enough to ensure that your asset selection aligns with your personality and goals. Therefore, this article covers 4 key points for preparing and understanding mutual funds.

Why choose mutual funds? Understand from the basics

Mutual Fund (Mutual Fund) is a mechanism where deposits from multiple investors are pooled together and established as a single fund category managed by specialists, approved by the Securities and Exchange Commission.

Once investors’ money is pooled, the fund manager will invest these funds in various assets according to the set policy to seek maximum returns while controlling risks within acceptable levels. When profits are realized, they are distributed to each investor proportionally to their investment.

Mutual funds have unique characteristics that make them valuable options for general investors, with the following advantages:

Advantages of investing through mutual funds

1. Efficient risk diversification

Individual investors often face limitations in initial capital and may not have access to certain assets, such as foreign securities or high-value assets. However, when money is pooled in large amounts and managed by experts, it can be diversified across a wide range of assets.

2. Professional management

Fund managers must hold licenses and be certified by regulatory authorities, meaning your investments are guided by knowledgeable and experienced professionals.

3. Transparency and oversight

The Securities and Exchange Commission oversees and monitors fund operations, giving investors confidence that their investments are properly managed.

Who should invest in mutual funds?

Mutual funds are suitable for:

• Investors new to the investment world
• Those with limited capital
• People without time to monitor markets and manage portfolios
• Those who prefer professional management

Mutual funds come in various types: Get to know each type

In Thailand, asset management companies offer a vast number of funds, which can be grouped into two main dimensions:

Classification based on liquidity (

Closed-End Funds )Closed-End Fund(

These funds are sold only once during the fundraising period. The number of units remains fixed throughout the project’s duration, with a clear end date for redemption. During the project period, the fund company will not buy back units. To sell units before the deadline, holders must find buyers in the secondary market. The advantage is reduced risk for the fund because the fixed amount makes portfolio management easier.

Open-End Funds )Open-End Fund(

Contrary to closed-end funds, open-end funds allow units to be bought and sold at any time with no fixed end date. Investors can sell units back for cash at any time, offering greater convenience. However, this also introduces liquidity risk for the fund, as the fund’s value fluctuates with inflows and outflows of investments.

) Classification based on investment policy ###

Money Market Funds (Money Market Fund)

Invests in deposits and short-term debt instruments (with remaining maturity not exceeding 1 year). Returns mainly come from interest, offering low yields but the lowest risk. Suitable for those seeking safety for their money.

Fixed Income Funds (Fixed Income Fund)

Invests in various debt instruments such as government bonds, corporate bonds, promissory notes, etc. Offers higher returns than money market funds with relatively low risk. Suitable for those seeking a balance between safety and returns.

Mixed Funds (Mixed Fund)

Invests in both debt and equity instruments, with equity allocation not exceeding 80% of the portfolio. Suitable for moderate to high-risk investors, especially those new to the stock market.

Flexible Funds (Flexible Fund)

Similar to mixed funds but without restrictions on the proportion of equity investments. The manager can adjust the allocation from 0% to 100% based on market outlook. Suitable for investors seeking flexibility.

Equity Funds (Equity Fund)

Invests primarily in stocks, with at least 80% of the portfolio in equities. Offers high returns but also high risk. Suitable for long-term growth investors.

Sector Funds (Sector Fund)

Invests in stocks within a specific industry, such as banking, transportation, or communication, with at least 80% in that sector. Returns may surpass the overall market, but risks are highest. Suitable for investors with a clear view of a particular industry’s growth potential.

Alternative Investment Funds (Alternative Investment Fund)

Invests in other assets such as gold, oil, agricultural commodities, which are highly volatile. Suitable for high-risk tolerance investors seeking diversification into alternative assets.

Worried about which fund suits you? The truth is, no single fund is perfect for everyone. It’s about finding a smart mix tailored to your personal financial situation.

Steps to prepare before opening an account

If you are ready to start investing in mutual funds, you need to go through some steps:

( 1. Assess your risk tolerance

Beginners often do not fully understand themselves. The easiest way is to take the KYC test required by all fund management companies before opening an account. For deeper insight, ask yourself: if your portfolio changes by a certain percentage, do you start to feel anxious? That percentage indicates your risk tolerance level.

) 2. Study the overall economic context

Before making decisions, it’s important to understand current economic trends, such as interest rates, GDP growth, and inflation. These factors will help you choose the appropriate asset types for this period.

3. Read the fund prospectus carefully

Once you narrow down to interesting funds, study the details from the prospectus, including trading conditions, fees, dividend policies, and other terms, to truly understand the structure and policies.

4. Analyze past performance

As part of your decision-making, review how well the fund has performed historically, its volatility, and how its assets are diversified. Choose funds that deliver good returns with manageable volatility.

5. Continuously monitor and adjust

If the economy changes, you may need to adjust your portfolio or switch funds. The key is to evaluate performance regularly.

How to calculate mutual fund returns

Once you purchase units, your profit or loss is measured by changes in NAV ###Net Asset Value###

NAV is calculated from the total value of assets held by the fund at the end of the day (based on current market value), minus liabilities and expenses.

If NAV exceeds your purchase price, the difference is profit (not yet realized until you sell the units). Conversely, if it’s lower, it’s a loss.

Returns come in two forms:

Capital Gain - Profit from buying and selling units (Realized when you sell units).

Dividend - Payouts from some funds periodically, without selling units.

To know the total return, combine both components.

Rise to the starting line and begin

No investor is born an expert. Everyone has limitations, whether in knowledge, experience, time, or initial capital. But these limitations become less significant when tools like mutual funds open access to the financial markets for ordinary investors.

What should not be forgotten is that not investing itself is a real risk. With all the solutions provided by mutual funds, doing nothing and letting your money lose value is not a good option.

Using mutual funds as an investment channel is simple and hassle-free. It’s more about taking action than just thinking.