Q1. How do mutual funds work?

Answer: A mutual fund pools money of many individual investors and a professional fund manager invests this pool of money in a wide range of investment instruments. Investors hold shares or "units" in the fund. The number of units an investor holds is based on the amount of money he or she invests. Fund unit is priced according to the value of the fund's investment at the close of the previous day.

Q2. What are the common investment instruments mutual funds invest in?

Answer: The most common investment instruments a mutual fund can invest in are - stocks, bonds and cash (e.g. bank deposits) all over the world. Some funds may also invest in derivative markets, such as futures and options markets.

Q3. How does investing in mutual funds benefit me?

Answer: It makes investing easy for you - once you decide which funds to invest in, you leave the day-to-day investment decisions to the professional managers. They not only take care of the complex and demanding tasks of market and investment instrument research but also the time-consuming administration work, like stock settlements. You can achieve asset diversification and benefit from high growth potential, as professional fund managers work for you to identify the best investment opportunities worldwide. A unit trust or fund generally invests in 50 to 100 different securities, often covering several different asset classes and/or individual national markets at once. This diversifies your investment a lot more efficiently than you can on your own.

Q4. Does investing in mutual funds mean that I give up control of my money?

Answer: No. You always have control of your investment. Firstly, it is your decision to invest in a specific fund and you make that decision based on your investment objectives. Secondly, you can always sell your units or switch to other funds on any dealing day.

Q5. Are there any mechanisms for mutual funds to control risks?

Answer: Basically, managing risk can be achieved in two ways – asset allocation and diversification. Different asset classes do not perform in the same way under different economic circumstances and mutual funds allow you to invest in different asset classes at once. For instance, high quality bonds might do well when stock markets are falling. Investing across shares, bonds and cash reduces portfolio risks and affords high potential return and relative stability. Other than diversifying across asset classes, a mutual fund also achieves diversification by investing in many different securities (usually 50 to 100) and different geographic markets. In this case, poor performance in one securities and one market does not do as much damage to the fund as it would if the entire portfolio is comprised of only a few securities from the same market.

Q6. What criteria should I consider when choosing a fund management company?

Answer: We believe a good fund management company should have the following qualities: market recognition, extensive global investment resources, proven performance track record, and strong customer focus with products and services tailored to clients' needs.

Q7. When is a good time to invest?

Answer: We believe the best way to invest is to start early and to take a long term and disciplined bottom-up investment approach with the focuses on earning growth and corporate fundamentals. In this sense, any time is a good time to start investing. The earlier you start, the earlier you benefit from the power of compounding effect. Remember, short-term volatilities in the market are hard if not impossible to predict.