How do you take profits from equity fund, managed fund of balanced fund? Do you sell when it appreciate or the gains would be added to initial capital at some point?
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How do you take profits from equity fund, managed fund of balanced fund? Do you sell when it appreciate or the gains would be added to initial capital at some point?
In equity funds and balanced funds, profit works differently from buying and selling individual stocks. When you invest in a mutual fund, your money is pooled together with other investors and managed by a professional fund manager. The profits made from the investments are usually reflected in theRead more
In equity funds and balanced funds, profit works differently from buying and selling individual stocks.
When you invest in a mutual fund, your money is pooled together with other investors and managed by a professional fund manager. The profits made from the investments are usually reflected in the unit price of the fund, called the Net Asset Value.
As the investments in the fund grow, the value of your units increases automatically. So your profit is already inside the value of your investment. You do not need to wait for dividends like in some stocks before seeing growth.
To take profit, you simply redeem or withdraw part or all of your investment through the platform you used, such as Stanbic IBTC Asset Management or ARM Investment Managers or InvestNaija. When you withdraw, you are selling your units at the current value, and your profit is included in that amount.
Using Mama Ngozi as an example, imagine she joins a group where her money is used to trade goods.
As the group makes profit, the value of her share in the group increases. She does not need to collect the profit separately every time. When she decides to leave the group or withdraw part of her money, she receives her original contribution plus all the growth it has accumulated.
In mutual funds, your profit is not usually taken as cash automatically into your pocket. It stays inside the investment and grows through compounding until you decide to withdraw.
So profit is taken by selling or redeeming your units, and not by waiting for a separate payout in most cases.
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