Frequently Asked Questions

Risk and return have a positive correlation. If we invest in a high-risk business or asset, we would have an opportunity to make a bigger profit or loss. Conversely, if we invest in a low-risk business or asset, we would have an opportunity to make a smaller profit or loss.

Therefore, investing in any business or asset always comes with a risk of making a profit or loss. There is no such business that would yield very high return but has very low or no risk.

A necessary amount should be saved enough for when it is needed or in an emergency. After that, the spare or extra amount of money could be invested, according to suitability of each individual depending on attributes, attitudes, perspectives, and needs, in order to build personal wealth. Each individual will expect different rate of return received from investments and have different risk tolerances. Subsequently, their savings are still enough to cover necessary use in case the investment is a failure.

A mutual fund is a collective investment scheme made up of a pool of money collected from many investors to invest in securities, financial instruments, savings, and other assets (e.g. stocks, bonds, debentures, certificates of deposit, warrants, real estates), as specified in the mutual fund’s prospectus. Mutual funds are established and managed by asset management companies. The return made from investment will be averaged and paid out to investors proportionately to their unit holdings.

Investing through mutual funds is suitable for amateur investors who are inexperienced in capital market or lack expertise. Since retail investors may have limited amount of money or may have no time to monitor their investment or market movement, asset management companies have fund managers, who are professionals having expertise and experiences in investment as required by the regulator, managing the mutual funds in accordance with the specified objectives and investment policies. The fund managers will analyze what and when to invest and will allocate the funds to be invested in various financial instruments in order to diversify the risk. Such business is supervised by a government agency (the Office of Securities and Exchange Commission) to ensure that investors are not taken advantage of.

However, investment status and return from investment can change all the time and cannot be precisely predicted. Therefore, any investment either self-managed or managed by professionals supervised by a regulator could yield a profit or loss, which means the investment principal can possibly be returned wholly or partly.

First, investors have to consider their investment objectives to find out how much return from investment they need and whether the level of risk associated with such investment is acceptable or not. Other things to consider include any preferences towards particular type of mutual funds, asset management company, or investment restrictions. The consideration above will be initial criteria used to select the type of mutual funds that is suitable to the investors.

After having the mutual funds passed the initial criteria, the past performances of those funds shall be considered. The past performances could be considered in ways of how much return they generate in different time periods, and how they are compared to the average return and to the benchmark of mutual funds of the same type. Then, investors can choose the mutual fund that yields a stable good return or that suits them best.

However, past performance is no guarantee of future results but merely historical data to be used as a reference for investors’ consideration. Once mutual funds are selected, investors then allocate their money to invest in those mutual funds accordingly.

Lastly, investors should evaluate performances of the mutual funds in their portfolio. If there is any mutual fund that does not perform as well as expected or has any of its characteristics or investment restrictions changed significantly, investors shall consider switching their investment into a new mutual fund(s) following the steps mentioned above. The portfolio should be revisited regularly.

Advantages
1. Mutual funds are managed by professionals who have expertise and are experienced in investment.
2. Mutual funds provide diversification which helps reducing the risk by offering a broader exposure to various assets.
3. Mutual funds offer a low minimum subscription which grants investors access to invest in assets which are normally inaccessible or demand a huge amount for each investment.
4. Mutual funds help saving time and cost of investment e.g. monitoring the right attached with and benefits received from the investment (dividend or right offering ).
5. Mutual funds provide liquidity, which is generally higher than liquidity of self-managed investment.
6. Investing through mutual funds provides a better tax benefit than self-investing does since mutual funds are not taxed on gains from investment (except for investment in Retirement Mutual Funds that fails to comply with tax-exempt conditions set by the Revenue Department).

Disadvantages
1. Subscription and redemption of units of mutual funds through asset management companies or selling agents may not be very convenient and quick as investing by yourself.
2. Mutual funds could not absolutely manage risk from investment. As required by law, mutual funds must maintain a certain portion of their portfolios in near-cash assets. Therefore, mutual funds could not reduce risk of investment by selling all of the securities or risky assets and converting them into cash like self-investing could do.
3. Disclosure of mutual funds’ investment information may be delayed since it has to comply with procedures and time periods required by law. Therefore, the lag time of receiving such information may cause inconveniences for investors when rebalancing their mutual funds in the portfolios.

Retirement mutual fund (“RMF”) is a type of mutual fund established to promote saving and investing culture of individuals, regardless of being a freelance or an employee, for the purpose of retirement preparation. Investors of the RMFs will receive a tax benefit, similar to those of provident funds, that is the investment in RMFs are income tax deductible but capped at 300,000 Baht, including the amounts invested in provident funds and government pension funds (if any). Such tax benefit will persist as long as investors comply to rules and conditions set by the Revenue Department (“the Rules and Conditions”). [Provident fund is a fund setup between the employer and employees and requires contributions from both parties whereas RMF is available for anyone and requires no contribution from the employer]

If investors could not comply with the Rules and Conditions set forth, the investors must return the amount of the tax benefit received during the last five calendar years to the Revenue Department within a specified time period. Late payment will be subjected to a fine. Moreover, capital gains made from any disqualified redemptions of RMF units, due to failing to comply with the Rules and Conditions, will be accounted as taxable income of the year when the units are redeemed. The above-mentioned circumstance is different from the case of normal mutual funds whereby capital gains from those investments are tax exempted.

Investors can directly contact investment consultants of asset management companies or their selling agents to request for information and prospectus or contact investment planners (level 1) for specific advice.

Investment planners (level 1) must have qualifications and knowledge, as required by the Office of Securities and Exchange Commission, in order to provide services to clients including performing clients’ due diligence and giving investment recommendation.