Investing in mutual funds is a popular choice for investors in Nepal. Mutual funds provide a way for individuals to pool their money together and invest in a diversified portfolio of stocks, bonds, or other securities. This article will explore the concept of mutual funds, how they work in Nepal, the types of mutual funds available, and the top-performing mutual fund schemes in the country.
What is a mutual fund, and how does it work in Nepal?
A mutual fund is an investment fund that is managed by professionals on behalf of investors. In Nepal, mutual funds are regulated by the Securities Board of Nepal (SEBON). Mutual funds collect money from investors and use that money to invest in a variety of assets such as stocks, bonds, or other securities. The profits generated from these investments are then distributed to the investors in the form of dividends.
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Understanding the concept of mutual funds
Mutual funds are a popular investment choice because they allow investors to diversify their portfolios without having to directly invest in individual stocks or bonds. By pooling money together with other investors, mutual fund investors can gain exposure to a wide range of securities, reducing the risk associated with investing in a single asset.
How do mutual funds work?
When investing in a mutual fund, investors purchase units of the fund. The value of these units is determined by the fund’s net asset value (NAV), which is calculated by dividing the total value of the fund’s assets by the number of units outstanding. As the value of the fund’s assets increases, the NAV and the value of the investor’s units also increase. Conversely, if the value of the fund’s assets decreases, the NAV and the value of the investor’s units decrease.
Benefits of investing in mutual funds
There are several benefits to investing in mutual funds. Firstly, mutual funds provide professional management. Experienced fund managers make investment decisions on behalf of the investors, based on thorough research and analysis. This expertise can potentially lead to higher returns compared to individual stock picking. Additionally, mutual funds offer diversification. By investing in a mutual fund, investors gain exposure to a diversified portfolio of assets, reducing the risk associated with investing in a single security. Finally, mutual funds are also highly liquid, allowing investors to buy or sell their units at any time, subject to market conditions.
Investing in mutual funds offers a multitude of benefits, making it a popular choice for investors worldwide. One of the primary advantages of these types of funds is their ability to provide diversification. Instead of putting all your money into a single stock or bond, a mutual fund allows you to spread your investment across a wide range of assets, therefore, reducing the risk associated with investing. They help in creating a well-diversified portfolio that includes different asset classes such as bonds, equities, precious metals etc. This diverse mix tends to yield steadier returns over the long term and mitigates the potential for loss.
Another significant benefit of mutual funds is professional management. When you invest in a mutual fund, you essentially hire a dedicated team of professional fund managers who research, select and monitor investments on your behalf. These professionals possess the requisite knowledge, experience, and resources that most individual investors lack, thus, ensuring that your money is well managed.
Mutual funds are also highly liquid investments compared to other investment instruments. This means you can buy or sell your units at any time based on the fund’s current net asset value. If there are sudden financial needs, one can easily redeem one’s investments and get the money back.
Furthermore, mutual funds offer the ability to start investing with relatively small amounts. This makes them an achievable investment tool for individuals who cannot afford to place large amounts of money into investments all at once. They are also convenient to buy and sell, making them accessible for novice investors.
Finally, mutual funds typically offer reinvestment of dividends and capital gains, which can significantly compound your investment over the long term.
In summary, the advantages of mutual funds are numerous and varied. They offer diversification, professional management, liquidity, affordability, convenience, and the potential for compounded returns. Therefore, whether you are a seasoned investor or just starting out, mutual funds can be an excellent addition to your investment portfolio.
Types of mutual funds available in Nepal
In Nepal, there are several types of mutual funds available to investors. Let’s explore some of the most common types:
When investing in mutual funds in Nepal, investors have the option to choose between open-ended mutual funds and closed-end mutual funds.
Open-ended mutual funds
Open-ended mutual funds do not have a fixed maturity period and allow investors to buy or sell units of the fund at any time. The fund size of open-ended mutual funds can increase or decrease based on market demand. These funds are ideal for investors who prefer liquidity and flexibility.
Open-ended mutual funds in Nepal
| Symbol | Mutual Fund Name | Fund Size (Rs.) |
|---|---|---|
| NIBLSF | NIBL Sahabhagita Fund | 1,861,541,930 |
| NADDF | NIC Asia Dynamic Debt Fund | 551,180,450 |
| SSIS | Siddhartha Systematic Investment Scheme | 452,559,199 |
| NMBSBF | NMB Saral Bachat Fund – E | 1,241,422,492 |
| SLK | Shubha Laxmi Kosh | 283,677,056 |
| NFCF | Nabil Flexi Cap Fund | 478,492,860 |
| KSLY | Kumari Sunaulo Lagani Yojana | 366,816,230 |
Table source: Sharesansar.com
Systematic Investment Plans (SIP)
Systematic Investment Plans (SIP) are a popular investment method for mutual funds in Nepal. Investors can invest a fixed amount of money at regular intervals, usually monthly or quarterly. SIPs allow investors to take advantage of the power of compounding and reduce the impact of market fluctuations on their investments.
Closed-end mutual funds
Closed-end mutual funds have a fixed number of units and a fixed maturity period. Investors can buy or sell units of the fund only during the initial public offering (IPO) or on the secondary market. Closed-end funds are traded on the Nepal Stock Exchange (NEPSE) and can be bought or sold at a premium or discount to their net asset value (NAV).
Close-end mutual funds in Nepal
| Symbol | Mutual Fund Name | Fund Size (Rs.) | Maturity Date | Maturity Period |
|---|---|---|---|---|
| LEMF | Laxmi Equity Fund | 1,250,000,000 | 2024-06-12 | 7 Years |
| NIBLPF | NIBL Pragati Fund | 750,000,000 | 2024-01-11 | 7 Years |
| NMBHF1 | NMB Hybrid Fund L- 1 | 1,000,000,000 | 2023-10-26 | 7 Years |
| NEF | Nabil Equity Fund | 1,250,000,000 | 2023-11-06 | 7 Years |
| SAEF | Sanima Equity Fund | 1,300,000,000 | 2024-12-26 | 7 Years |
| SEF | Siddhartha Equity Fund | 1,500,000,000 | 2027-11-08 | 10 Years |
| CMF1 | Citizens Mutual Fund-1 | 820,000,000 | 2025-03-03 | 7 Years |
| NICGF | NIC Asia Growth Fund | 835,200,000 | 2025-03-12 | 7 Years |
| NBF2 | Nabil Balanced Fund – 2 | 1,120,000,000 | 2029-05-31 | 10 Years |
| CMF2 | Citizens Mutual Fund – 2 | 560,000,000 | 2026-07-08 | 7 Years |
| NMB50 | NMB 50 | 1,250,000,000 | 2026-09-01 | 7 Years |
| SIGS2 | Siddhartha Investment Growth Scheme-2 | 1,200,000,000 | 2029-08-26 | 10 Years |
| NICBF | NIC ASIA Balanced Fund | 755,000,000 | 2029-08-27 | 10 Years |
| SFMF | Sunrise First Mutual Fund | 860,000,000 | 2029-11-04 | 10 Years |
| LUK | Laxmi Unnati Kosh | 652,623,600 | 2027-10-01 | 7 Years |
| SLCF | Sanima Large Cap Fund | 1,200,000,000 | 2028-02-23 | 7 years |
| KEF | Kumari Equity Fund | 1,000,000,000 | 2031-03-18 | 10 years |
| SBCF | Sunrise Bluechip Fund | 1,250,000,000 | 2031-03-26 | 10 years |
| PSF | Prabhu Select Fund | 1,250,000,000 | 2028-06-21 | 7 years |
| NIBSF2 | NIBL Samriddhi Fund – 2 | 1,500,000,000 | 2031-05-29 | 10 years |
| NICSF | NIC Asia Select-30 | 1,250,000,000 | 2028-07-05 | 7 years |
| RMF1 | RBB Mutual Fund 1 | 1,250,000,000 | 2028-07-23 | 7 years |
| NBF3 | Nabil Balanced Fund III | 1,250,000,000 | 2031-09-23 | 10 years |
| MMF1 | Mega Mutual Fund – 1 | 1,250,000,000 | 2031-09-08 | 10 years |
| KDBY | Kumari Dhanabriddhi Yojana | 1,225,072,590 | 2032-07-25 | 10 years |
| NICFC | NIC Asia Flexi Cap Fund | 1,020,000,000 | 2029-06-15 | 7 years |
| GIBF1 | Global IME Balance Fund-I | 1,025,763,600 | 2032-07-28 | 10 years |
| NSIF2 | NMB Sulav Investment Fund – II | 1,200,000,000 | 2032-09-01 | 10 years |
| SAGF | Sanima Growth Fund | 672,532,600 | 2033-11-27 | 11 years |
| NIBLGF | NIBL Growth Fund | 1,320,000,000 | 2033-01-17 | 10 years |
| SFEF | Sunrise Focused Equity Fund | 1,000,000,000 | 2032-02-12 | 10 years |
| PRSF | Prabhu Smart Fund | 1,000,000,000 | 2032-03-14 | 10 years |
| C30MF | Citizens Super 30 Mutual Fund | 750,723,900 | 2033-05-14 | 10 years |
| SIGS3 | Siddhartha Investment Growth Scheme 3 | 805,800,000 | 2033-04-30 | 10 years |
| RMF2 | RBB Mutual Fund 2 | 846,119,290 | 2033-05-21 | 10 years |
Table source: Sharesansar.com
Top performing mutual fund schemes in Nepal
Nepal has several mutual fund schemes that have consistently performed well. Let’s take a look at some of the top-performing mutual funds in the country:
An overview of NIBL Sahabhagita Fund
NIBL Sahabhagita Fund is an equity fund managed by NIBL Ace Capital Limited. This fund has consistently outperformed its benchmark and has delivered attractive returns to its investors. It primarily invests in the stocks of companies listed on the Nepal Stock Exchange.
Exploring NIBL Samriddhi Fund
NIBL Samriddhi Fund is a balanced fund managed by NIBL Ace Capital Limited. This fund aims to provide investors with long-term capital appreciation by investing in a diversified portfolio of stocks and fixed-income securities. It has a track record of delivering stable returns to its investors.
Investing in NIBL Pragati Fund
NIBL Pragati Fund is an open-ended mutual fund managed by NIBL Ace Capital Limited. This fund invests in a mix of equity and debt instruments, aiming to generate capital appreciation and regular income for its investors. It has a strong track record of delivering consistent returns over the years.
Factors to consider before investing in mutual funds
Before investing in mutual funds, there are several factors that investors should consider:
Understanding the role of fund managers
Fund managers play a crucial role in the performance of mutual funds. It is important to assess the experience and track record of the fund manager before investing. A skilled and experienced fund manager can make a significant difference in the returns generated by a mutual fund.
Analyzing Net Asset Value (NAV)
The NAV of a mutual fund represents the book value of the fund’s assets per unit. Investors should pay attention to the NAV and track its performance over time. A consistently increasing NAV indicates a well-performing fund.
The maturity period of mutual fund schemes
Investors should also consider the maturity period of a mutual fund scheme before investing. Some funds have a short-term investment horizon, while others have a long-term investment horizon. It is important for investors to align their investment goals and time horizon with the maturity period of the fund.
How to invest in mutual funds in Nepal
Investing in mutual funds in Nepal is a straightforward process. Investors can follow these steps:
Process of buying and selling mutual fund units
To buy or sell mutual fund units, investors can directly approach the fund house or utilize the services of authorized distributors or brokers. The units can be purchased or redeemed based on the prevailing NAV of the fund.
Exploring the role of Nepal Stock Exchange (NEPSE)
The Nepal Stock Exchange (NEPSE) plays a crucial role in the trading of mutual fund units. Closed-end mutual funds are traded on the NEPSE, and investors can buy or sell units of these funds on the secondary market, subject to market conditions.
Initial Public Offering (IPO) in mutual funds
When a mutual fund is launched, it goes through an Initial Public Offering (IPO) process. During the IPO, investors can subscribe to the units of the fund at the offer price. This is an opportunity for investors to invest in the fund at its initial stages.
FAQs about Mutual Fund in Nepal
Can you provide a list of mutual funds operating in Nepal?
Absolutely, there are several mutual fund schemes operating in Nepal. These include the NIBL Samriddhi Fund-1, the NIBL Pragati Fund, the NIBL Sahabhagita Fund, the Siddhartha Equity Oriented Scheme, and the Global IME Samunnat Scheme-1, among others.
How does dividend work with mutual funds, particularly the NIBL Sahabhagita Fund?
The fund manager of the NIBL Sahabhagita Fund declares a dividend based on the income generated from the mutual fund’s investments. After paying off the required fees and charges, the remaining income is distributed among shareholders as dividends. Dividends are paid out in Rs (Nepali currency) and are typically set on a per-share basis.
What’s the difference between an Open-ended Mutual Fund and a Closed-end Mutual Fund?
The primary difference lies in their structure and liquidity. Open-ended mutual funds always accept funds from the general public and there is no limit on the number of shares the fund can issue. On the other hand, a closed-end fund issues a fixed number of shares during an initial offering and does not accept additional investments post this period.
What is the Sahabhagita Fund managed by NIBL?
The NIBL Sahabhagita Fund is an open-ended mutual fund scheme managed by Nepal Investment Fund Limited, a subsidiary of NIBL. It aims to provide a regular income to the investors through investment primarily in fixed income securities like fixed deposits and bonds issued by banks in Nepal, among other securities permitted by the Nepal Rastra Bank and Securities Board of Nepal.
Can you tell me more about the NIBL Samriddhi Fund and the NIBL Pragati Fund?
Both the NIBL Samriddhi Fund and the NIBL Pragati Fund are closed-end mutual funds operated by NIBL, limited to a certain maturity date. The primary difference between these two is the investment strategy. The Samriddhi Fund focuses more on growth while the Pragati Fund has a balanced investment strategy, owning a mixture of stocks and bonds for both growth and income.
How does systematic investment in mutual funds work?
A systematic investment plan (SIP) is a way to invest in mutual funds. It allows investors to put a fixed amount into a mutual fund of their choice at regular intervals. This disciplined approach towards investment helps in building a substantial corpus over a period of time.
What does a mutual fund’s growth fund mean?
A growth fund in mutual fund parlance is a fund that invests primarily in stocks with an objective of capital appreciation. These funds aim to grow the money invested by purchasing shares of companies that are projected to increase in value over time.
What was the first mutual fund scheme in Nepal?
The first mutual fund scheme in Nepal was the NIDC Capital Market Limited’s Growth Fund that was introduced in 2050 BS. This marked the beginning of mutual funds in Nepali Capital Markets.
How are mutual funds managed in Nepal?
Mutual funds in Nepal are managed by Fund Management Companies (FMCs) that are licensed by the Securities Board of Nepal. These FMCs, such as Siddhartha Capital, are responsible for making investment decisions based on the fund’s investment objectives.
If I’m new to mutual funds and wondering where to start, what would you recommend?
It’s essential to start by understanding your investment goals and risk tolerance. It would be beneficial to consider starting with open-ended funds as they offer high liquidity. Reading about the different types of mutual funds operating in Nepal could also be insightful. Lastly, seeking advice from financial advisors or mutual fund managers would also be helpful.
