November 26, 2020 All Things Fintech in Africa

Manual on How to invest in mutual funds in Africa.

Step By Step Manual on how to invest in mutual funds in Africa.

For many who major in investments and bonds, the idea of mutual funds must not be far-fetched, as the financial world throws that word around on several occasions. The rise of mutual funds in Africa has become a milestone for investors who are finding out ways in which they could grow their funds. This investment plan involves pooling money from investors which would be put into securities over a while. The company running the mutual fund is usually registered by financial institutions to assure transparency. Although individuals venture into creating a mutual fund, the idea is usually carried out by professionals investment firms who assure their prospective investors of a good profit margin. 

In Africa, the people’s need to expand their financial intelligence is growing, as they tend to research on ways through which they can grow their capital. This article aims to put readers through a step by step guide on how to invest in mutual funds in Africa. 

Guide on investing in Mutual Funds

Make Your Findings

As a new investor, you need to do your research to educate yourself on what you’re going into. Make adequate research on everything you need to know about mutual funds, how it works, and even the types of mutual funds. There are different types of mutual funds; Open-ended scheme, Close-ended scheme, Debt funds, Tax saving funds, Exchange Traded funds (ETF), Growth, or Equity schemes. An open-end fund is a scheme that can issue and redeem shares at any time. A closed-end fund, on the other side, is a scheme that issues shares that are not redeemable from the fund. Debt funds are the ones that invest in fixed income or fixed interest securities like bonds and treasury bills. For Tax saving funds, it is basically that investments made in them will have tax benefits. ETF is generally what we know as the exchange stock market. It is an investment in stocks. Growth or equity fund invests primarily in the shares and stocks of companies and can either be actively or passively managed. It is of high risk. There are so many other types of mutual funds you could do your research on to be able to decide which would be best suited for you. 

Risk Evaluation 

Although mutual funds have a low-risk rate, the chance of losing is still inevitable. Understanding that there are risks involved helps prepare one for the unknown, for whatever is to happen. There are so many investments that could start well and end in disasters. Hearing out testimonies of other investors could help you prepare for what is to come. While some might discourage you, others might encourage you to take the bold step of investing. 

Choose where to buy mutual funds.

The choice on the investment company, you decide to partner with can be based on so many factors. It is usually advisable to contact authorities in this field to guide you through the process of mutual fund selection and participation. There so many available options either virtually or walk-in institutions.

Registration and Data Collection 

To start investing in any mutual fund as a new investor, you would be required to fill a KYC (Know your customer) form to verify your identity. This gives the investing firm a chance to access your viability and determine if being apart wouldn’t be to their detriment. 

Open an investment account. 

This is where you know it is all becoming real. In opening an investment account, it is required that accurate results are used during registration. Ensure that all the possible information given by the institution is properly read, and you don’t need to rush. Take your time, as it involves a lot of money, and care as to be taken. 

Style of Investment 

There are two types of investors when it comes to mutual funds. These are active and passive investors. Active investment is basically the constant, continual, and frequent buying and selling of shares. It involves a portfolio manager and co-managers. It requires being involved actively in order to make use of profitable opportunities. Passive investment involves less buying and selling and for investors who believe in long term appreciation. Passive investment is basically good for people interested in cheaper funds and lesser fees.

Start little

 It is advisable that you start little to be on a safe side when you’ve finally decided to invest in mutual funds. Starting little enables you to work on a budget; that way, there’s a little money left for you while you wait for your investment.

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Proper Documentation 

Proper documentation makes sure there is a legal document binding the investment you have with the investment institution. This is very important to guarantee the safety of the investment. It legalizes the financial transactions between you and the investment company in case of any problems. It is good as it can be used for reference. 

Start Investing

After following the required steps and guide to investing in mutual funds, and you are certain of your choice to invest, then you can begin investments at your own pace. Soon enough, you would get the hang of it and understand its structure. 

Follow up. 

Make sure you follow up on your investment. Attention should be paid to your investment portfolio as it helps you keep track of the mutual fund’s happenings. This way, you are always on track and on the safer side.

In conclusion, we have looked at the steps through which you can invest in mutual funds in Africa. A better understanding of the schematics of the investment should be studied before involvement. With adequate research and reliable mutual fund investment institution, you can be assured of success. 

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