Mutual Funds in Thailand

Mutual Funds in Thailand


When people have excess money, they want to make it grow. A lot of means can lead them to reach their goals. For example, some people deposit their money with different kinds of financial institutions; others prefer to invest directly into stock exchange markets by purchasing shares of listed companies. However, there is another way that has become more important to financial markets, especially in Thailand. It is a mutual fund. The structure of the mutual fund is not complicated to understand; furthermore, it provides a lot of advantages for investors.

A mutual fund is a professionally managed type of collective investment that pools money from many investors and puts it in stocks, bonds, short-term money market instruments, and/or other securities. It will have a manager who trades the pooled money on a regular basis. After realizing capital gains or losses, the mutual fund is passed out in the form of dividends to the individual investors.

Over the past decades, the mutual fund has become popular for four major reasons.
1. It can help investors reduce their risks. If they invest directly into only one or two stocks, they can get the loss when a price of each stock falls. On the contrary, since the mutual fund is a pool of money, a manager can manage his fund by purchasing a variety of securities. This method can reduce risk from holding only one or two securities in investors’ portfolios.
2. A capital gain from selling shares of the mutual fund or a dividend that investors receive has a tax exemption. Thus, people can earn the full amount of money without withholding tax.
3. People can save time for following volatile stock exchange markets since the manager who are professional in fund management will be a person who keeps constant tabs on markets. The fund manager will adjust a portfolio for the strongest possible performance.
4. The management fee on each fund is quite low. It is normally lower than the brokerage fee that people pay for brokers when they buy or sell securities.

As of June 2008, there were more than 1,000 mutual funds in Thailand, with total net asset value over 1.6 trillion baht. This kind of investment has grown rapidly over the passed seven years. In 2001, only 291 mutual funds were registered with the Securities and Exchange Commission of Thailand (SEC). The total net asset value was only 360 billion baht. The SEC anticipated that the total funds and their net asset value may reach 1,500 and 2 trillion baht respectively by the end of the next two years. These amounts demonstrated that people chose the mutual funds as one tool to increase their wealth.

Even though there are many ways people can increase the value of their money, they have paid attention to investing in the mutual funds. Because of the simple structure and many benefits it provides for investors, these can let the mutual fund market in Thailand grow quickly. It will not be surprising if one sees the amount of mutual funds and net asset value grow in the next few years. (527)