According to Tejarat News, in previous reports, we explained some components of investing in the stock market and types of funds. Meanwhile, one of the most profitable and popular stock exchange funds can be considered a fixed income fund.
As can be seen from the name of this fund, by investing in this fund, the shareholder receives daily and fixed interest. Of course, the principal of the capital is also guaranteed in this fund.
Fixed income investment funds are one of the common funds that give good returns to their shareholders with minimal risk. Most risk averse people invest in fixed income funds.
Fixed income funds allocate most of their assets to bank certificates of deposit and fixed income securities and invest the rest in stocks of listed companies. For this reason, they have the lowest possible risk and are considered a safe and secure option for investing in the stock market.
Of course, the investment method of fixed income funds is also based on the approval of the Board of Directors of the Stock Exchange Organization, and the funds cannot invest outside of the approval.
The main point here is that there is no need to get an exchange code to invest in these funds.
What is the profit of fixed income fund?
The profit of daily fixed income funds is calculated and paid to the owners of the investment units or shareholders in specific periods (one month, three months and six months). Also, in funds that do not pay cash interest, the amount of interest will be added to the value of the investment units.
Types of fixed income funds
- Fixed income fund with profit distribution: at specific times of each month, an amount is distributed to the shareholders’ account as profit.
- Fixed income fund without dividend: This type of fixed income fund does not have dividend and shareholders benefit from the difference in the price of issuance and cancellation.
- Fixed income fund dedicated to government bonds: It is not allowed to buy shares, preemptive rights and other capital market instruments.
Bank competition and fixed income funds
Most experts believe that there is a fierce competition between banks and fixed income funds. These two investments are suitable for risk-averse people, but with the difference that investing in stock exchange funds gives more profit to shareholders.
For example, banks give conventional interest of 18 to 20% for long-term investment, but in short-term investment in fixed income funds, you can have an interest between 20 and 40%. That is, by investing in funds, there is no need to block their capital in the bank for months, and with a correct and short-term investment in fixed income funds, the investors will get multiple profits.
Of course, the amount of profit of each fund depends on the conditions, and some funds may give profit at the same time as the bank, and others may give more profit. The profits of the funds depend on their investment conditions, which are explained to the shareholders at the time of investment.
Getting to know the common terms of investment funds
- Investment unit: This term is almost equivalent to the word share in stock companies
- NAV: Net asset value or NAV means the net value of the fund’s total assets. Basically, the NAV of each investment fund unit is the same as the share price in stock companies.
- Issuance NAV: Issuance NAV is the same as the purchase price of the investment unit.
- Cancellation NAV: Cancellation NAV is also the same as selling price in listed companies.
- Issuing units: Issuing units is the same as buying investment units.
- Canceling the unit: Canceling the unit is the same as selling the unit and withdrawing money from the funds.