Investment funds are expected to perform better this year, following the successful 2016, on expectations that more individual investors will purchase their own investments, reported Dau tu Chung khoan (Securities Investment) newspaper.
Two factors that will make investment funds attractive to individual investors this year include the trading of some 1,500 companies in the securities market, which will bring investment opportunities to individual investors.
However, that also means individual investors will face risks if they decide to purchase investments on their own, as there are so many options, and investors may not choose correctly.
Another factor is the profit that an investor can make from entrusting investment funds with their money.
Individuals are allowed to invest at least 1 million VND (44.4 USD) in an open-end fund and could have the opportunity to obtain profits that are higher than the market’s average, as their money will be managed by a professional asset management firm and used to invest in local assets.
Entrusting a professional asset management company will make it easier for individual investors to make money from the securities market, rather than dealing with a group of products and services by themselves.
According to Bao Viet Fund Management Company (BVF), investment funds saw strong increases in recent years by proving that their investment portfolios were efficient. This has made investment funds more popular and favoured by investors.
BVF reported that there are now 18 open-end funds, including five bond investment funds and 10 stock investment funds. The total value of the open-end funds reached more than 3 trillion VND in 2016, a yearly increase of 41 percent.
At VietFund Management (VFM), as of the end of 2016, two open-end funds, VF1 and VF4, saw annual growth rates of 19.3 percent and 16.4 percent, and average growth rates of 17.3 percent and 18.3 percent for the last five years, respectively.
At MB Capital, an investment arm of Military Joint Stock Commercial Bank, investment funds and investment portfolios managed by the company had an average growth of nearly 15 percent in 2016.
At SSI Asset Management Company, open-end fund SSI-SCA has reached a growth rate of 43.4 percent since its founding in September 2014, higher than the growth rate of 9.9 percent for the benchmark VN Index on the HCM Stock Exchange during the same period. In 2016, SSI-SCA fund rose 24.1 percent, compared to the market’s growth of 14.8 percent.
More participation from institutional investors, such as investment and asset management funds, will help reduce the number of individual investors in the securities market and cause the market to operate in a more sustainable manner, according to the Chairman of the HCM Stock Exchange Tran Van Dung.
The ratio of the number of individual investors in the securities market now is 99 percent, and it will be difficult to reduce that ratio in the next three to five years, Dung said.
He noted that there are some solutions that need to be put in place to reduce that ratio.
Firstly, the market must be transparent. Transparency will bring fair investment opportunities to all investors. Then, individual investors who are not skillful and professional will entrust professional asset management firms with their money.
Secondly, market regulators need to have comprehensive policies that encourage more foreign investors to enter Vietnam’s securities market. Those policies include the lifting of the local market from frontier levels to emerging levels.
Thirdly, the market should develop a system of pension funds and improve the network of participating insurance-finance companies.
“When those three solutions are implemented, the ratio of institutional investors in the securities market will increase and the market will operate more sustainably,” Dung said.