RIZAL TECHNOLOGICAL UNIVERSITY

Cities of Mandaluyong and Pasig

TYPES

OF

MUTUAL FUNDS

Submitted by:

PCBET-22-502P

BATALON, Hanna Rose L.

ESPAÑOLA, Sofhia Rhane M.

LAHAY LAHAY, Tymoty Rochelle

SERAFIN, Rosel M.

Submitted to:

Prof. Florencia A. De La Cruz

 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

What Is a Mutual Fund?

A mutual fund is a financial vehicle that pools assets from shareholders to invest in securities
like stocks, bonds, money market instruments, and other assets.

A mutual fund's portfolio is structured and maintained to match the investment objectives
stated in its prospectus.

Mutual funds give small or individual investors access to professionally managed portfolios of
equities, bonds, and other securities.

Most mutual funds are part of larger investment companies such as Fidelity Investments,
Vanguard, T. Rowe Price, and Oppenheimer.

A mutual fund has a fund manager, sometimes called its investment adviser, who is legally
obligated to work in the best interest of mutual fund shareholders.

Types of Mutual Funds

There are several types of mutual funds available for investment, though most mutual funds fall
into one of four main categories which include stock funds, money market funds, bond funds, and
target-date funds.

● Stock Funds - As the name implies, this fund invests principally in equity or stocks. Within this
group are various subcategories.
● Equity Funds - are also categorised by whether they invest in domestic (U.S.) stocks or
foreign equities.
● Bond Funds - A mutual fund that generates a minimum return is part of the fixed income
category. A fixed-income mutual fund focuses on investments that pay a set rate of return,
such as government bonds, corporate bonds, or other debt instruments. The fund portfolio
generates interest income, which is passed on to the shareholders.
● Index Funds - This strategy requires less research from analysts and advisors, so there are
fewer expenses passed on to shareholders and these funds are often designed with
cost-sensitive investors in mind.
● Balanced Funds - The objective of this fund, known as an asset allocation fund, is to reduce
the risk of exposure across asset classes.
● Money Market Funds - The money market consists of safe, risk-free, short-term debt
instruments, mostly government Treasury bills.
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

● Income Funds - These funds invest primarily in government and high-quality corporate debt,
holding these bonds until maturity to provide interest streams. While fund holdings may
appreciate, the primary objective of these funds is to provide steady cash flow​to investors.
● International/Global Funds - An international fund, or foreign fund, invests only in assets
located outside an investor's home country. Global funds, however, can invest anywhere
around the world. Their volatility often depends on the unique country's economy and political
risks.
● Specialty Funds - Sector funds are targeted strategy funds aimed at specific sectors of the
economy, such as financial, technology, or healthcare. Regional funds make it easier to focus
on a specific geographic area of the world. Socially responsible funds, or ethical funds,
invest only in companies that meet the criteria of certain guidelines or beliefs.
● Exchange Traded Funds (ETFs) - A twist on the mutual fund is the exchange-traded fund
(ETF). ETFs also enjoy tax advantages from mutual funds. Compared to mutual funds, ETFs
tend to be more cost-effective and more liquid.

Open-end VS. Closed-end Funds

Open-end Funds - a mutual funds scheme that is open for buying / selling at any time. There
is no maturity period in open ended funds, which means that you can remain invested in the scheme
for as long as you want.

An open-end funds is a diversified portfolio of pooled investor money that can issue an
unlimited number of shares. The fund sponsor sells shares directly to investors and redeems them as
well. These shoes are priced daily based on their current net asset value (NAV).

Closed-end Funds - is a type of mutual find that issues a fixed number of shares through a
single initial public offering (IPO) to raise capital for its initial investments. Its shares can be bought
and sold on a stock exchange but no new shares will be created and no new money will flow into the
fund.
It is generally does not continuously offer its shares for sale but instead sells a fixed number of
shares at one time. After its initial public offering, the fund typically takes on a market, such as the
New York Stock Exchange or the NASDAQ Stock Market.

Compare and contrast the Open-end and Closed-end Funds

Differences
● The prices for open funds are fixed once a day at the NAV (Net Asset Value), preferably at the
end of the day, and are the price at which fund shares can be purchased for that day.
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

Close-ended funds traded throughout the day like ordinary stocks and traded at the prevailing
price any time during the day since it works on a real-time basis.
● The selling price of an open-ended fund involves the NAV and any entry/exit load as prescribed
by the Prospectus. These loads are charges which are implemented for entering or exit the
fund or both primarily for management of the funds. Close-ended funds are traded at a
Premium or Discount to the NAV.
● NAV’s of various funds are quoted in daily newspapers or on the website of the fund for
open-ended funds. Closed-ended funds can obtain their NAV from financial newspapers or
through the website on a weekly basis.
● Open-ended mutual funds permit systematic purchases irrespective of the market conditions
and also allow investments in smaller quantities. Unlike closed-ended funds, which allow only
lump-sum investment, making it riskier for investors to consider, especially under choppy
market conditions. Trends have also suggested that closed-ended funds come up when
markets are performing exceedingly well, tempting prospective investors.
● Profits - Profits depend on the investors, and when they exit the fund. If they have exceeded
their initial investment, then it is considered as a Gain. Profits to the shareholders can be in the
form of income and capital gain distributions. It can also be capital gains realized from the sale
of shares with increasing share value though it is exposed to tax liability.

Similarities
● Both these funds are managed professionally with an aim to exceed the investments which
have been made by a large pool of investors.
● It aims to achieve the same through diversification in multiple investment assets rather than a
single stock.
● The commission or fees of the investment managers can depend on the returns they are able
to garner from the market.
● Another point of similarity refers to the Economies of scale, whereby gathering a large pool of
funds from multiple investors enables the investment and operating costs to be lowered.

The advantage and disadvantage of Open-end Mutual Fund

Advantages of Open-ended Mutual Funds
There are many advantages of these funds, the primary objectives of it being:
● Liquidity access: The investor has no restriction on the redemption of the units of the funds. It
provides a quick liquidity option. And, these units can be redeemed at NAV on the day of
redemption.
● Availability of past performance: Since the net asset value is calculated at the end of each
trading day, investors can keep track of the performance of these funds and make the decision
accordingly.
● Systematic plans: These funds can be accessed for investment and withdrawal through
systematic plans. The investors have the option of a Systematic Investment Plan (SIP),
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

Systematic Withdrawal Plan (SWP), and Systematic Transfer Plan (STP). These can
help to invest a fixed amount in the scheme continuously.
● Diversified portfolio: Open-ended funds are invested in a wide range of assets that belong to
a variety of companies and industries. This diversification of the portfolio helps in reducing the
risk of the investment.
● Low investment: Open-ended funds do not require a huge amount of investment. The
investor can start with a small amount of systematic investment plan.

Disadvantages of Open-ended Mutual Funds

Here are some disadvantages of open-ended mutual funds that investors must be aware of:
● Market Volatility: Open-ended mutual funds are susceptible to market risks and high volatility
due to fluctuations in the NAV of the underlying securities. Even with diversification strategies
used by the fund manager, these funds are always exposed to market risks.
● Large Inflows and Withdrawals: Unlike closed-ended funds, open-ended mutual funds are
subject to huge inflows and withdrawals, which can lead to unfavorable prices if there is a quick
outflow of money, resulting in losses for all investors.
● Cash Flow Risks: Open-ended mutual funds also face cash flow risks due to daily changes in
the NAV, reacting to market volatility. This can cause a negative impact on the returns of the
fund.
● High Expense Ratios: Open-ended mutual funds can have higher expense ratios than other
investment options, resulting in reduced returns for investors.
● Mis-selling: There is a risk of mis-selling by unscrupulous agents or advisors due to the
complex nature of mutual funds, leading to inappropriate investment decisions.
● Regulatory Risks: Changes in regulations can also affect the performance of open-ended
mutual funds, requiring investors to stay informed about any regulatory changes that may
affect their investments.

The advantage and disadvantage of Closed-end Mutual Fund

Advantages of Closed-ended Mutual Funds
Just as every financial concept has its own advantages an disadvantages, so does this concept. Let
us try to identify the advantages first.
● Stability – These are stable with their asset base. At the time of NFO, these funds gathered a
vast asset base. The fund manager is at minimal risk of asset redemption and the change in
the asset. These funds can be invested in other financial assets, equity, or debt securities.
● New Opportunities – It allows investors to invest in a wide range of new and creative
strategies.
● Freedom from Large Flows – There is no risk of massive inflows and outflows in closed-end
funds. Investor money is locked until the time of maturity. As a result, the fund manager is
capable of making rational decisions.
● Enhanced Flexibility – The investor is free to sell the fund and liquidate his position per rules
made by the fund house. These units can be sold in the market during trade hours.
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

● The fund managers can create a unique Portfolio – An impressive portfolio to earn better
returns.

Disadvantages of Closed-ended Mutual Funds

The disadvantages of the concept are as follows.
● Cost – Subscriber has to pay massive fees on buying or selling unit,
● Subscribing Option – Can be purchased only through brokers or intermediaries.
● Prompt Changes – Portfolios under such funds are usually unpredictable and subjected to
rapid changes.
● Liquidity – These funds offer less liquidity as compared to open-end funds.
● Pricing – Discounting factors may lower the price of the closed-ended funds.

The vast majority Funds

The vast majority of funds in the marketplace are open-end funds. Open-End funds are usually
preferable to closed-end funds for the following reasons:
● Management Talent: The better open-end funds attract more investors over time. Therefore,
they can afford to pay the necessary money to hire leading managers . I'm not saying
closed-end funds don't have good managers, too, but generally, open-end funds attract better
talent.
● Expenses: Because they can attract more investors, and therefore more money to manage,
the better open-end funds charge lower and, therefore, most costly to operate. Closed-end
funds tend to be much smaller are deducted out of shareholders return before a fund pay its
investors their returns, therefore, relatively higher annual expenses depress the returns for
closed-end funds.
● Fee-free selling: With an open-end fund, the value of a share ( known as the net asset asset
value ) always equals 100 percent of what the fund's investment (less liabilities are currently
worth. And you don't have the cost and trouble of selling of your shares to another investors.
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

Sector-specific and Thematic Funds

Sectoral funds aim to invest predominantly in companies working in a specified sector. The
equity exposure is limited to a single sector such as Banking, Pharma, FMCG, IT, Auto, Metals etc.

For instance, the Covid-19 pandemic opened up various opportunities for growth in sectors like
pharma and technology. A fund that only invests in companies within the pharmaceutical sector would
identify investment opportunities within the sector and seek to cash in on potential high growth
returns. Similarly, an Infrastructure Sector fund would look to invest in companies that are
participating in and benefiting from growth in Indian infrastructure and related activities.

These funds focus majorly on one sector as to why they carry a high-risk possibility with them,
but also come with high-return potential, in case the sector performs well due to some favorable
condition. Sector-specific funds are usually suited for investors with a very high-risk appetite.

Thematic mutual funds carry a broader vision in terms of the investable universe and hence,
aim to invest predominantly in the companies impacted by a specified theme. Such companies
typically belong to more than one sector. Thus, the scope and investment objective of a thematic fund
is much larger than that of a sectoral fund.

For example, rural income led demand growth could be a theme which may involve several
sectors. When rural incomes increase, then rural demand also increases and that creates demand for
products like agri-inputs, two-wheelers, discretionary consumer products, white goods etc. So, a
thematic fund with focus on rural consumption can invest in all these stocks that look to ride on the
rural spending theme. It can invest across different sectors and market caps as long as it ties to the
theme.

Since thematic funds invest around a core theme, their exposure is spread across a few
sectors. Thus, compared to sectoral funds, thematic funds have a relatively lower risk of negative
impact when an individual sector under-performs.
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

Seeing How Mutual Funds Works

A mutual fund is a collection of investment money pooled from many investors to be invested
for a specific objective. When you invest in a fund, you buy shares and become a shareholder of the
fund. The fund manager and a team of assistants determine which specific securities (for example,
types of stocks or bonds) they should invest the shareholders’ money in to accomplish the objectives
of the fund and keep shareholders happy.

Mutual funds are investment companies that pool your money with the money of hundreds,
thousands, or even millions of other investors to "mutually" buy stocks, bonds, and other investments.
The company hires a portfolio manager and a team of researchers whose full-time job is to analyse
and purchase investments that best meet the fund’s stated objectives.

Because good mutual funds take most of the hassle and cost out of figuring out which
securities to invest in, they’re among the best investment vehicles ever created:

· Mutual funds allow you to diversify your investments — that is, invest in many different
industries and companies instead of in just one or two. By spreading the risk over a number of
different securities representing many different industries and companies, mutual funds lessen your
portfolio’s instability and the chances of a large loss.

· Mutual funds enable you to give your money to the best money managers in the country —
some of the same folks who manage money for the already rich and famous.

· Mutual funds are the ultimate couch potato investment!

A misconception some investors hold regarding mutual funds is that they all invest in stocks
and, therefore, are too risky. They don’t, and they’re not. By using funds, you can invest in a whole
array of securities, ranging from money market funds to bonds, stocks, and even real estate.

All funds aren’t created equal. Some funds, such as money market funds, carry virtually zero
risk that your investment will decline in absolute value (but the purchasing power could indeed be
eroded by inflation). Bond funds that invest in shorter-term bonds don’t generally budge by more than
several percentage points per year.
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

Strengths and Weaknesses of Mutual Funds

STRENGTHS

● Fund managers are well trained.

● Fund saves you money and time.
● You choose your risk level.
● Funds undergo regulatory scrutiny.

WEAKNESSES

● Mystery (risky) investments.

● Investments that cost an arm and a leg.
● High cost of managing funds.
● Volatility of your investment balance.

Conclusion

Mutual funds are professionally managed bonds, stocks, and other investment products. They
are made up of a pool of money collected from various investors. The money is then used to invest in
different assets.

It is a versatile investment choice that can help investors gain profits and build wealth by
tapping into the opportunities presented by the markets. Additionally, mutual funds toffer plans for
every investor to meet varied short-term and long-term goals.

There are different types of mutual funds to invest in and which also come with many
advantages and disadvantages. As to why it is vital for investors to do their research and consider
factors such as carefully evaluating their investment goals and risk tolerance for them to be able to
make informed decisions.
 RIZAL TECHNOLOGICAL UNIVERSITY
Cities of Mandaluyong and Pasig

References

Charles Schwab. (2023). Understanding Mutual Funds. Retrieved from

https://www.schwab.com/mutual-funds/understand-mutual-funds

Chen, J. (2022). How a Closed-End Fund Works and Differs From an Open-End Fund. Investopedia.
Retrieved from https://www.investopedia.com/terms/c/closed-endinvestment.asp

Chen, J. (2021). Open-Ended Fund: Definition, Example, Pros and Cons. Investopedia. Retrieved
from https://www.investopedia.com/terms/o/open-endfund.asp

Closed-end Funds. Investor.gov U.S. Securities and Exchange Commission. Retrieved from
https://www.investor.gov/introduction-investing/investing-basics/glossary/closed-end-funds#:~:text=A
%20closed%2Dend%20fund%20generally,or%20the%20NASDAQ%20Stock%20Market

Hayes, A. (2023). Mutual Funds: Different Types and How They Are Priced. Investopedia. Retrieved
from https://www.investopedia.com/terms/m/mutualfund.asp

Quantum (2023). Everything You Need to Know About Sectoral or Thematic Funds. Retrieved from
https://www.quantumamc.com/article/everything-you-need-to-know-about-sectoral-or-thematic-funds

Sajumon, A. (2023). Open Ended Mutual Fund – Meaning, Advantages, Disadvantages. Fisdom.
Retrieved from https://www.fisdom.com/open-ended-mutual-fund-meaning-benefits-and-advantages/

Srivastav, K.A. (n.d). WallStreetMojo. Retrieved from

https://www.wallstreetmojo.com/open-ended-vs-closed-ended-mutual-funds/

What is open ended mutual fund? Mirae Asset Mutual Fund. Retrieved from
https://www.miraeassetmf.co.in/knowledge-center/what-is-open-ended-mutual-fund#:~:text=An%20op
en%20ended%20fund%20means,as%20long%20as%20you%20want
 PCBET-22-502P

TYPES OF
MUTUAL
FUNDS
GROUP 2
 PRESENTERS/REPORTERS

BATALON, ESPAÑOLA. Sofhia LAHAY LAHAY, SERAFIN,

Hanna Rose L. Rhane M. Tymoty Rochelle Rosel M.
What is Mutual
Fund?
A mutual fund is a financial
vehicle that pools assets
from shareholders to invest
in securities like stocks,
bonds, money market
instruments, and other
assets.
 Types of
Mutual Funds
Stock Funds
Income Funds
Bond Funds
International/Global Funds
Index Funds
Specialty Funds
Balanced Funds
Exchange Traded Funds (ETFs)
Money Market Funds
Open-end and
Closed-end Funds
Open-end Funds - a mutual fund
scheme that is open for
buying/selling at any time.

Closed-end Funds - is a type of

mutual find that issues a fixed
number of shares through a single
initial public offering (IPO) to raise
capital for its initial investments.
 COMPARE AND CONTRAST THE
OPEN-END AND CLOSED-END
FUNDS
Differences
The prices for open funds are fixed once a day at the NAV (Net Asset
Value).
The selling price of an open-ended fund involves the NAV and any
entry/exit load as prescribed by the Prospectus.
NAV’s of various funds are quoted in daily newspapers or on the
website of the fund Closed-ended funds can obtain their NAV from
financial newspapers or through the website on a weekly basis.
 Differences
Open-ended mutual funds permit systematic purchases irrespective
of the market conditions and also allow investments in smaller
quantities unlike closed-ended funds, which allow only lump-sum
investment, making it riskier for investors to consider, especially
under choppy market conditions.
Profits depend on the investors, and when they exit the fund.

Similarities
Both these funds are managed professionally with an aim to exceed
the investments which have been made by a large pool of investors.
It aims to achieve the same through diversification in multiple
investment assets rather than a single stock.
The commission or fees of the investment managers can depend on
the returns they are able to garner from the market.
Another point of similarity refers to the Economies of scale, whereby
gathering a large pool of funds from multiple investors enables the
investment and operating costs to be lowered.
 The advantage and
disadvantage of
OPEN-end Funds
ADVANTAGES DISADVANTAGES
Liquidity access. Market Volatility
Availability of past Large Inflows and
performance. Withdrawals
Systematic plans. Cash Flow Risks
Diversified portfolio. High Expense Ratios
Low investment. Mis-selling
 The advantage and
disadvantage of
CLOSED-end Funds
ADVANTAGES DISADVANTAGES
Stability Cost
New Opportunities Subscribing Option
Freedom from Large Flows Prompt Changes
Enhanced Flexibility Liquidity
The fund managers can Pricing
create a unique Portfolio
The vast majority Funds

Management Talent
Expenses
Fee-free selling
SECTOR-SPECIFIC FUNDS
Sector-Specific Funds are mutual
funds that mainly invest in
companies from one particular
sector. There are several sectoral
funds such as banking, information
technology, energy & power,
consumption, auto, etc.
 Thematic Funds

Thematic Mutual Funds invest in

sectors or businesses operating within a
common theme.
For example, a thematic fund that is
focused on an agricultural theme might
invest in equity stocks of core
agricultural companies, farm equipment
& automobiles, chemicals, fertilisers, etc.
 Differences of Sector-Specific
and Thematic Funds

Sector-Specific Thematic

Invest in specific sectors Invest across sectors within a single theme

Involve very high concentration risk Risk is relatively lower

Offer relatively more diversification

Offer minimal diversification
opportunities
 SEEING HOW MUTUAL
FUNDS WORK
Mutual funds are investment companies that pool your
money with the money of hundreds, thousands, or even
millions of other investors to "mutually" buy stocks, bonds,
and other investments. The company hires a portfolio
manager and a team of researchers whose full-time job is
to analyze and purchase investments that best meet the
fund’s stated objectives.
Strengths of
Mutual Funds
Fund managers are well trained.

Fund save you money and time.

You choose your risk level.

Funds undergo regulatory scrutiny.

Weaknesses of
Mutual Funds
Mystery (risky) investments.

Investments that cost an arm and a leg

High cost of managing funds.

Volatility of your investment balance.

Thank
you!