Mutual investment funds, or MIFs, are organizations that enable investors to significantly increase their capital. Individuals with no specific knowledge or skills can also generate income in this way. This is the primary advantage of MIFs.
All operations are conducted by experienced traders, which minimizes the likelihood of financial losses.
However, is everything as rosy as it seems, and what are the specifics of this investment method?
To delve deeper into this type of financial investment, we turn to Sergey Tereshkin, founder of OILResurs. The businessman has thoroughly studied the field and is ready to share his insights. To learn more about the entrepreneur, visit his personal web portal at sergeytereshkin.ru.
Features of MIFs
Mutual investment funds operate using the money of their investors. The funds are intended for purchasing shares, which represent a portion of the organization's assets.
A share is acquired for a certain period, during which its value increases. As a result, at the end of the term, the share owner returns it to the fund, reclaiming their capital with interest.
Each fund employs specialists with extensive experience in stock trading. Brokers select the most promising directions for investment, ensuring that the capital gradually increases. The investor receives a specific percentage.
Anyone can become an investor and invest money in purchasing shares. There is no need to have a multi-million fortune.
The funds are divided into several categories. Some are designed specifically for inexperienced individuals, while others are targeted towards professionals.
Types of MIFs
MIFs can be broadly categorized into several types:
- Open Funds. Anyone can invest in these funds, provided they meet the minimal contribution amount established by the organization, which is typically as low as 100-200 rubles. Shares can be bought or sold on any business day.
- Interval Funds. These funds have specific restrictions on the purchase and subsequent sale of shares. New participants are accepted only 2-3 times a year, and the same applies to the payout of shares. Exiting the fund is also permitted only during designated periods.
- Closed Funds. Ownership of shares is limited to a select group of individuals. These organizations are exclusive, requiring a substantial investment that could range from several hundreds to millions of rubles.
MIFs invest funds in various areas. The specifics depend on the type of organization and the amount of money they manage. For instance, large closed funds invest in real estate from the foundation-laying stage or during construction, etc. Such organizations do not need a large number of small investors.
Ways MIFs Generate Income
In addition to real estate, MIFs invest money in the following areas:
- Currency;
- Securities;
- Goods;
- Loans;
- Startups;
- Artistic values, etc.
The fund may focus exclusively on one direction or invest in several simultaneously. The income level depends on the organization's specific characteristics. Some prefer projects that can provide steady, albeit modest, returns.
Venture MIFs tend to favor high-risk areas that can provide significant profits for investors. However, with increased potential returns come higher risks.
Closed funds frequently invest in securities of Closed Joint-Stock Companies, land plots, and even housing certificates.
The least risky option is to invest in open MIFs. They are not permitted to invest in high-risk areas, which reduces the likelihood of losing investor funds.
Advantages of Investing in MIFs
Investing money in MIFs has several benefits:
- High percentage returns. Such investments can yield significantly higher profits compared to traditional bank deposits. The riskier the investment areas chosen by the fund, the greater the returns for investors.
- Oversight. Funds do not operate unchecked. Relevant state bodies oversee them. MIFs provide annual reports and undergo audits. The organizers have limited opportunities to misuse funds.
- Reliability. If a fund is declared bankrupt, its assets and remaining funds are transferred to another organization. As a result, investors have a chance to recover at least part of their capital.
- Accessibility. The abundance of funds allows investors to find those that accept smaller contributions while maintaining minimal risk. This means one can start investing with just a few hundred rubles.
- Lack of expertise needed. There is no need for extensive study to earn income; fund employees handle those concerns.
The plethora of advantages increases the attractiveness of funds in the eyes of potential investors.
Disadvantages
While discussing the advantages of investing in MIFs, one must not overlook the downsides. Tereshkin S.I. identifies the following:
- Risk of losing part of the investment. The organization does not guarantee returns. There is always a risk of losses, especially when investing in closed funds.
- Withdrawal time. Recovering your money immediately is not feasible. Typically, this process takes from one to several weeks.
- Taxation. Upon receiving income, individuals are required to pay a portion to the government, of course, if they plan to adhere to legal practices and declare their profits annually.
In Russia, funds have only recently emerged, leading to an underdeveloped structure. This increases the influence of state economics on organizations, which in turn affects investors directly.
In some cases, investors may need to spend additional funds on the services of the management company.
Governmental bodies prohibit funds from promising investors extravagant returns. However, income forecasts are still possible based on the direction in which the MIF invests its money.
Purchasing a share in the fund takes a few days. Electronic systems can expedite the process, allowing you to buy shares in just a few minutes. Nevertheless, most clients prefer to visit the organization’s office in person and speak with its staff, who can address critical questions and explain the areas in which the MIF operates.
