Frequently Asked Questions (FAQs) on Mutual Funds and The Afrinvest Equity Fund (AEF)
What is a Mutual Fund?
A Mutual Fund is an investment that pools the money of a number of people with the purpose of investing the total sum for the benefit of all the investors. The investors receive shares of the entire pool of assets, thereby diversifying their investment. The pooled assets are managed by professionals who buy and sell securities according to the objective of the fund.
What types of Mutual Funds are available?
There are several mutual funds dedicated to investing in various asset classes and securities. Mutual Funds that exist include real estate funds, fixed income funds, equity funds and money market funds etc.
What are the benefits of investing in Mutual Funds?
- Professional fund managers: Your money is managed by fund managers who are experienced.
- Diversification: funds are invested in a number of companies across a broad section of industries and sectors thereby reducing the volatility of returns.
- Transparency: there is a daily declaration of the prices. There is also access to regular updates on the value of your investment.
What is Net Asset Value per share (NAV per share)?
Net asset value per share is derived by dividing the total value of all the securities in the portfolio, less any liabilities, by the number of fund shares outstanding.
Who should buy Mutual Funds?
Anybody can buy into mutual funds depending on an investor’s objectives and risk tolerance. There are varieties of mutual funds that meet various investment needs.
What are the risks involved in investing in Mutual Funds?
The risks of investing in a mutual fund are identical to those of investing in the assets held by the fund. Therefore, investment in an equity fund will have similar risks to investing in individual stocks. However, a mutual fund does offer a reduction of these risks due to the diversification of holdings.
What are the factors that influence the performance of mutual funds?
A mutual fund is affected by the factors that influence the underlying assets and the skill of the investment manager. In an equity fund, those factors will include the economy, and performance of the various industries and companies held by the Fund.
I am an aggressive equity investor. Why should I invest in a mutual fund?
Taking uncalculated risk is rarely effective over the long term. However, investing with a portfolio manager looking to take informed risks in search of high returns usually pays off in the long run. A manager is plugged into the market, and unlike an individual investor has only one vocation which is picking stocks.
Of all the mutual funds available in the market place, why should I buy the Afrinvest Equity Fund?
Afrinvest as a firm is built on a foundation of in-depth investment research and financial innovation. The Afrinvest Equity Fund gained 16.9% while the All Share Index (ASI) made a loss of -6.2% in 2016. Given the firm’s pedigree and a history of success for institutional clients, Afrinvest has the best mix of service, research and management to give the investor that extra edge.
Are there any guaranteed returns?
No guarantee on equity fund. The returns on the fund will be influenced greatly by the returns on the stock market. However, the skill of the manager can then be measured by their ability to maximize gains and minimize any losses.
What is the minimum amount accepted to invest in Afrinvest Equity fund?
The minimum initial investment in the Afrinvest fund is N50, 000 and N10, 000 for every subsequent investment.
Can investments be made on a continuous basis i.e. paying an agreed amount every month?
Yes. An automatic investment plan can be set up to make investments into the fund on a regular basis i.e., monthly, weekly or quarterly. This can be done automatically by instructing your bank or can be initiated by the client.
Can a client use his/her units on the Fund to act as collateral?
That will depend on the institution offering the loan.
Can a client use his/her certificate to buy into the fund?
Not directly. However, a client can bring his/her shares certificates to our offices to be liquidated by our brokers. The proceeds will then be invested in the Fund and the units held by the clients duly adjusted.
How quickly and easily can an investor in Afrinvest Equity Fund exit and how would exit price be determined?
Investors can exit the fund at any time. It takes 5 working days after the dematerialization of your certificate before you receive value.
Will a progress report on the fund be made available regularly, how often?
Yes, the fund NAV will be published on a weekly basis. A client will also receive a quarterly statement indicating their current holdings and the total value of their investment.
Do I pay a penalty for trying to cash out before a stipulated time?
Cashing out will be possible at any time after the allotment of such units. Units redeemed within 90 days of the purchase will attract a processing fee of 2% of the net redemption value.
Do I have any shareholder rights in the companies that you are invested in?
No, all the rights are vested in the fund itself and executed by the manager in the best interest of the fund.
What type of return will I get?
Return on the Fund may include dividends and appreciation in unit value of the Fund.
Will I pay tax on the dividend paid to me?
There will be no further taxes withheld.
Can I invest in the Afrinvest Equity Fund in favor of my children, relatives and friends?
Yes, you can invest in the fund in anyone’s name.
Can I invest if am not living in Nigeria?
Yes, anybody can invest whether you live in Nigeria or abroad.
Can two or more people invest jointly?
Yes, they can.
Can a company or association invest?
Yes, any duly registered company or association can invest in the name of that association or company.
How will my return be paid to me?
Dividend warrant can be issued in your name or reinvested on your behalf.
How do I start investing in AEF?