What Is Mutual Fund Turnover?

Mutual funds are also known as indefinite investment companies. An investment trust organization that provides investments for small property owners and distributes stocks that can be converted into cash at any time. In western countries, due to the developed securities market and serious speculation, people cannot decide which stocks to buy or when to buy and sell. Some people who have experience in securities management start from the pursuit of income, capital appreciation, and even speculative purposes, organize "common funds", raise funds by themselves, and pool investors' funds to buy a variety of securities. Alternative purchase plans from which you receive commissions. Investors can also exchange investment types by paying some fees as needed. The price at which it sells shares is not directly affected by the market, but only depends on the price of the securities held by the mutual fund. Generally, each share represents only the net asset value of the mutual fund (total assets minus total liabilities divided by the number of shares). In recent years, mutual funds have emerged in some parts of China, which has raised funds for economic construction and played a positive role in booming the securities market.

Mutual Fund

Chinese name: Mutual Fund
Foreign name: Mutual Funds

Conditions of establishment: Names should comply with the "Registration Regulations for Name Registration"
The scope of work: Engage in

Fund company establishment conditions:

"1", the name shall comply with the "Registration Regulations for the Registration of Names", and the name of an investment enterprise that has reached the scale is allowed to use the word "investment fund".

"2", the industry term in the name can use "

It is a fund-raising investment tool that collects a lot of small money to make a large amount of money and gives it to a person or a professional organization to operate and manage to obtain profits.

In China, the mutual fund's official name is "Securities Investment Trust Fund", which is a beneficiary certificate issued by an investment company in the form of a trust contract. The main investment targets are securities, such as stocks, futures, bonds, and short-term securities.

In the United States, it is commonly known as a mutual fund. In addition to securities investment, it also invests in gold (or other precious metals), futures, options, and real estate.

In addition, the funds of the British system (including many overseas mutual funds issued around the world) are called "unit trusts" and the investment targets are quite diverse.

Diversify investment risk

Mutual fund assets are larger than ordinary investors, so they are sufficient to spread the funds among different stocks and even different investment instruments to achieve true risk diversification without causing a major loss due to a wrong stock selection. .

Professional operation management

Mutual fund companies employ professional fund managers and research teams to engage in market research. They have a deep understanding of the overall domestic and foreign investment environment, individual investment environments, and the status of individual companies. Moreover, as long as you spend a little fund management fees to enjoy the services of experts, it can be said that the best gospel for small investors.

The best tax-saving channels (1) Domestic funds: When the bid-ask spread of a stock fund is profitable, it is exempt from tax in accordance with current regulations. As for the distribution of funds to investors, if the source of the dividend is generated by the investment target, then It needs to be included in comprehensive income tax, and can enjoy a tax allowance of 270,000 yuan according to the special deduction for savings and investment.

(2) Overseas funds: China's tax law currently adopts territorialism. Individuals investing in overseas mutual funds, regardless of the capital gains or dividends generated by the bid-ask spread, are not required to be included in personal income tax reporting, and can legally save taxes.

Liquidity is quite flexible

When investors do not want to invest, they can opt out at any time. The redemption amount of domestic bond funds can be received on the next business day after the redemption application. Domestic stock funds and overseas funds can get the funds about one week. Unlike other investment vehicles, there is a risk that they cannot be sold.

Small amount of money to invest globally

Mutual funds diversify investments across different targets and even different financial markets (regions, countries). Investors can share the fruits of economic growth in various regions of the world as long as the minimum is three yuan (a fixed amount). Compared with other investment vehicles, the investment limit is much smaller.

High security

Mutual funds are based on the principle of separation between storage and operation. If the fund company or the custodian bank fails unfortunately, the creditor shall not request the seizure or exercise of other rights on the fund assets, and the investors' rights and interests will not be affected as a result.

Investment fund

Open style

Open-end mutual funds can redeem or issue shares at any time with a net asset value (NAV). The net asset value is the market price of all securities held divided by the number of shares issued. Expressed by formula: NAV = (market value of portfolio-value of portfolio liabilities) / number of shares issued. In addition, the fund's net value or price is liquidated once after each market close, and all newly purchased or redeemed shares are calculated based on the net value after the market close on the day. Number of shares issued by open-end funds as investors buy

sponsor

The sponsor is usually a financial services company, such as a mutual fund company, broker, bank or insurance company. The sponsor invests the initial capital for the fund and convenes the third parties needed to operate the fund. In the United States, the sponsor must register the fund with the Securities and Exchange Commission. This registration document will be the fund's prospectus, which will state the sponsor,

In summary, we can draw two conclusions: first, you should choose to invest in stocks; second, once you buy, you should hold them for as long as possible. The next question is whether you should choose individual stocks or entrust others to help you invest in stocks.

If you're tired of facing financial data all day, or don't care about Kodak's profitability at all, or whether Nike and Reebok shoes are good or bad, then choosing an investment fund is the easy way.

Helping those who want to invest in stocks and don't know how to analyze stocks, this is why mutual funds are created. All you need is to take cash to buy a share of the fund, and your money, along with a lot of other people's money, is invested by investment experts to invest in stocks. You want the funds to be managed by experts, because you expect them to help you choose the right stocks and buy and sell them in a timely manner.

In addition to having a professional fund manager to manage the investment, the mutual fund also has an advantage: it will invest a lot of stocks, that is, when you buy a fund, you suddenly become dozens, or even Are shareholders of hundreds of listed companies, whether you invest $ 50 or $ 50 million, and this is much less risky than buying a stock.

More and more challenges

Mutual funds are becoming a common investor to participate in the securities market and accumulate wealth due to their comprehensive advantages such as professional management, diversified investment, sufficient liquidity, rich information provision, wide variety selection, high convenience and relatively low cost. And the most important tool for achieving long-term financial goals. Because of this, global mutual funds have achieved sustained development in the past few years. The total size of assets under management has increased from US $ 11.9 trillion in 2000 to US $ 16.2 trillion in 2004, an average annual growth rate of 8%. The number of funds has increased from 2000 52,000 only increased to 56,000 in 2004, with an average annual increase of 960.

Generally speaking, the role of mutual funds in capital formation, economic development and social welfare is increasing. However, with the changes in the financial systems of various countries, the adjustment of regulatory rules and the intensification of market competition, the development of global mutual funds is facing more and more challenges.

Fund governance issues

Since the mutual fund industry is based on the trust relationship between fund managers and fund holders, governance issues are critical. With the rapid growth of asset scale, two major governance issues of mutual funds have become increasingly prominent: First, the lack of understanding of the board of directors by fund holders has resulted in the interests of fund holders not being effectively protected. The US-based mutual fund system emphasizes the independent decision of fund holders and the role of the board of directors, but in fact, fund holders are relatively familiar with fund managers and fund families, and have little knowledge of the board of directors, especially independent directors. Due to the lack of communication with the board of directors, fund holders cannot monitor the directors' behavior. When the interests of fund holders and investment consultants are not consistent, independent directors may fall to the investment consultant's side and damage the interests of fund holders. two is

From the beneficial exploration conducted by various countries, the following measures need to be prioritized:

Improve and improve the regulatory legal framework to protect the interests of fund holders. In the regulatory legal framework, it is necessary to further highlight the protection of fund holders' right to know, such as further improving and improving the fund information disclosure mechanism,

U.S. mutual fund violations cause significant losses to investors

Allianz Capital Management Holdings, the major U.S. mutual fund company, announced on the 10th that two senior executives of the company were forced to resign due to suspected illegal operations. Since the beginning of September, the U.S. local judicial and securities regulators have gradually stepped up the rectification of the mutual fund market. This market has also exposed more and more problems. Although the problems currently exposed are only the "tip of the iceberg," It's shocking enough. Many people can't help asking: what is happening in this area that has always been defending the interests of investors?

Stock market involvement is difficult

The size of the US mutual fund market is about 7 trillion U.S. dollars. From the 1980s to the 1990s, mutual fund development was very rapid. Due to the relatively rich market profits, mutual fund companies of various names have sprung up. At present, this market can be said to be a mixed bag, some companies have hundreds of billions of dollars in funds, and some have only hundreds of millions of dollars.

In the late 1990s, the US stock market skyrocketed, and mutual fund development encountered a rare golden age. However, the good times did not last long. Since 2001, the US stock market has been in a long-term downturn. Since most mutual funds have invested in the stock market, most of the mutual funds have been hit hard by the shrinking of the stock market. According to statistics, in the past three years, mutual funds investing in stocks have lost about 25% of their funds, and most mutual fund companies are losing money. Since March 2003, the U.S. stock market has recovered and warmed up. By October, the Dow-Jones Index had risen by 20%, the Nasdaq Composite Index had risen by 41%, and the S & P Index had also risen by 21%. The situation of mutual funds has improved. However, market experts believe that the number of mutual fund companies that went bankrupt or exited the market in 2003 will still exceed the number of new entrants. The difficult situation of mutual funds has not completely ended, and will continue to experience shocks and consolidation in the future.

In addition to the aforementioned downturn in the stock market, there are two main reasons for the significant contraction of mutual funds. First, US investors have changed their views on mutual funds. In the United States, investors are mainly from institutions and individuals. There are two main ways they invest in securities: one is to buy securities independently or through a broker, and the other is to buy mutual funds. Because mutual funds are large, have multiple securities portfolios, and are operated by professionals, most investors are optimistic about this type of investment, so mutual funds also enjoy a higher status in the minds of investors. However, with the frequent exposure of incidents of illegal operation of mutual funds, in particular, some mutual fund managers use funds to develop personal relationships, deliberately harming investors' interests in transactions, and the overall image of mutual funds has been damaged.

Second, competition is too fierce and management costs rise. The threshold for the mutual fund market is not high. Some funds can initially enter the market for hundreds of thousands of dollars, so market competition is becoming increasingly fierce, while the client base of mutual funds has not changed much, and the management costs of some companies have increased. On the one hand, the increase in management costs, on the other hand, it is difficult to expand the size of the fund. Therefore, some mutual funds that are difficult to persist have withdrawn from the market or sold to more powerful companies. The general market forecast is that as the US economy and stock market come out of the trough, and after market shocks and consolidation, the days of mutual funds will be slightly better than the previous two years. In the second half of this year, the profits of some major fund companies increased significantly. In September, new funds injected into mutual funds reached $ 17.3 billion. In addition, since 2002, many retirement funds have joined the ranks of mutual funds, and the client base of mutual funds has further expanded.

Illegal operation was revealed

The U.S. mutual fund has always advertised itself as a staunch defender of the interests of small and medium investors. Objectively speaking, in the 60 years of market supervision history of the US Securities and Exchange Commission (SEC), the reputation of mutual funds is indeed good. Even when Wall Street financial scandals are frequently exposed, the reputation of mutual funds has not been greatly affected. . Therefore, when mutual funds were exposed to illegal operations, the entire market suddenly became an uproar. People could not help asking: Is there still a "pure land" in the US financial market?

In early September 2003, New York State Attorney General Spitzer stated in the allegations submitted to the New York Supreme Court that in the past four years, the five largest U.S. mutual fund companies have caused dozens of investors in illegal operations. Billion in losses.

In late October, some senior executives of the top 5 mutual funds in the United States were sued by the Boston District Court for securities fraud. Although some of the accused companies or individuals neither acknowledge nor deny the violations, the frequent changes in the personnel of mutual fund companies have led investors to believe that the US mutual fund market is not a "pure land" as people originally thought. According to the materials disclosed so far, the mutual funds are operating illegally in the following areas:

First, the interests of some investors were harmed by delaying transactions. The so-called "delayed trading" refers to the continued trading at the current price after the stock market closes, and the law requires that stocks be bought and sold at the price of the next trading day. Second, market rhythm trading, where some investors quickly buy and sell different investments in mutual funds The portfolio uses the difference between the stocks held by the fund to obtain benefits. Third, there is the option to disclose information. Mutual fund companies do not disclose all stock information, but have reservations. Of course, when the mutual fund completes the above operations, the privileges of trading and obtaining information are limited to large investors, and many small and medium investors are not necessarily aware of this. Therefore, it is not excessive to say that mutual funds are sacrificing the interests of small and medium investors in exchange for large investors' support for the fund.

Market experts do not agree on the above operations of mutual funds. Generally speaking, delaying trading is illegal, but market rhythm trading is not illegal. Although most of the mutual fund management rules expressly prohibit market rhythm trading, according to a survey report released by the SEC in early November, more than half of the 88 largest mutual funds have engaged in such transactions, and 70% of mutual fund industry players Good knowledge of the operation of such transactions. Although it does not constitute a violation of the law, it has caused losses to investors' interests. Massachusetts has filed a civil allegation against Putnam Investment Company. For such allegations, some mutual fund companies have stated that the alleged operation has actually been carried out For years, at best, it was just an unethical act.

Governance and rectification are unpredictable

In investigating mutual fund violations, SEC Chairman Donaldson is behind New York's Attorney General Spitzer. Originally, there was a slight contradiction between Donaldson and Spitzer. In this way, his face was even worse. In order to not lose to the New York local judicial authority in this matter, on November 7, Donaldson was at the Securities Industry Association. In a speech, he said that the SEC will seriously deal with illegal activities of mutual funds and vigorously remedy the industry. In response to "delayed trading", he said that the SEC will require mutual funds to replace intermediaries to process orders placed after the closing of the stock market in order to reduce the losses caused to investors by delayed trading. For market rhythm trading, the SEC is considering imposing violations on offenders. He also suggested that the mutual fund company appoint a senior director to supervise delayed transactions, market-paced transactions and selective disclosure of information, and impose necessary personal penalties on offenders. The difference between Donaldson and Spitzer is that the SEC focuses on the governance and rectification of the entire mutual fund market. He believes that illegal activities may not be limited to surface transactions. He is worried that there are also violations of income distribution by mutual funds and securities brokers. Tacit understanding.

U.S. local judicial and securities regulatory agencies' rectification of mutual fund governance will cause high-level fluctuations in mutual funds, and it is estimated that more CEOs will be dismissed. Some of First America Bank, Potevio Securities, Strong Asset Management Supervisors have become targets for cleanup. Will this rectification cause the mutual fund market to shrink? This is a matter of widespread concern. Generally speaking, the rectification of governance will have a certain negative impact on mutual fund revenues, and some companies will face fines, but profit losses are not major. The main loss is that the relationship between mutual funds and some investors, especially institutional investors, will undergo subtle changes. Some retirement fund plans that originally promised to invest in mutual funds are already considering reducing or even exiting mutual funds. According to the latest material, Putnam Investments has lost multiple pension fund clients in Massachusetts and Iowa due to allegations of illegal operations, and the company's assets under management have shrunk by $ 14 billion since the end of October. In addition, the reorganization of the US mutual fund market by Spitzer and the SEC will also have an "overflow" effect. Since some of Wall Street's most influential mutual fund companies have a European background, Britain, France, the Netherlands and other countries are also in a hurry. Investigations into the operation of the country's mutual funds begin.

Talking about the significance of the US mutual fund governance, the most important thing is to raise the threshold for access to the mutual fund market and regulate the market at the same time. Don't let mutual fund companies rush into the market and cause vicious competition. Once vicious competition is formed, the common In order to survive, fund companies will do whatever they can to prevent violations.

According to Thailand s World Daily news on May 20, investors from 24 countries investment mutual funds rated the value of investment levels of Thai mutual funds as B, ranked third in the world, and scored on par with the Netherlands, Singapore, and Taiwan. The top two are the United States and South Korea.

Morning Star revealed that a 2013 investment experience survey from investors who invested in mutual funds in 24 countries and regions found that Thailand s investment grade was ranked B by investors, with the Netherlands, Singapore, and Taiwan The rating is flat and tied for third place, which is higher than many research target countries and regions. As Thailand implements favorable tax regimes for investment, such as non-deduction of differential taxes, reduction and exemption of income tax on investment income of long-term funds, etc., investors' income has increased, and the performance evaluated in accordance with relevant financial and tax regulations is at a good level.

However, fund investors have put forward proposals to adjust the restrictions on funds invested in foreign assets, and allow foreign investors to directly take orders when foreign funds are allowed to trade. In terms of fees and other expenditure items, the calculation method of the Thai mutual fund allows investors to pay higher fees than other countries, and most fund units in other countries do not charge for the offer. Therefore, some details of the operation of the Thai mutual fund need to be improved and Adjustment.

In terms of public information release, the Thai mutual fund is rated as moderate, because the manual issued by the mutual fund manager also lacks details such as the cost of buying and selling trading fund units, the name, experience of the fund manager, and the time limit for managing the fund.

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What Is Mutual Fund Turnover?

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