MINTMutual funds and unit trusts explained
How pooled investment funds work in Ghana, what the fees mean, and how to compare one fund with another.
Read at your own pace. A video for this lesson is on the way.
A simple explanation
A mutual fund or unit trust pools money from many people. A licensed fund manager invests the pool in things such as Treasury bills, bonds and shares. Each investor owns units in the fund. The price of a unit, called the net asset value (NAV), rises or falls with the value of what the fund holds.
In Ghana these funds are called collective investment schemes and are regulated by the Securities and Exchange Commission (SEC) under the Securities Industry Act, 2016 (Act 929).
Example
You put GHS 500 into a fund when one unit costs GHS 1.00. You own 500 units. A year later the unit price is GHS 1.12, so your units are worth GHS 560. The fund's yearly management fee is already reflected in that price.
Now imagine the fund's holdings fell and the price is GHS 0.95. Your 500 units are worth GHS 475. The fund does not guarantee your money.
Why it matters
Funds let you start with small amounts and spread your money over many investments without picking each one yourself. That is why many investment apps are built on funds.
Key things to know
- Types: money market funds (short term, lower risk), fixed income or bond funds, balanced funds (a mix), and equity funds (shares, higher risk).
- Fees: look for management fees, entry or exit fees, and app fees such as top-up or express withdrawal charges.
- Custodian: a separate institution should hold the fund's assets.
- Fact sheet: the manager should give you one showing holdings, fees and past performance.
- Verify: the manager must appear on the SEC list of licensed fund managers. The SEC has also published notices about funds whose managers lost their licences, so check before you invest.
- Fund returns are not fixed. A "current yield" is an estimate.
Risks to consider
- Unit prices can fall.
- Some funds have withdrawal delays.
- A fund can look good over a short period and disappoint over a longer one.
Key takeaway
A fund is a share in a pool managed by a licensed professional. It is easy to start, but it is not a bank deposit: check the manager, the fees and what the fund holds.
This is general financial education, not financial advice. Figures are illustrative. Speak to a licensed professional before making investment decisions.
Sources: SEC Ghana, licensed fund managers, SEC Ghana, Unit Trusts and Mutual Funds Regulations (L.I. 1695)