Basic Concept Of Fund

Fund investment is an integrated investment plan. According to preset fund investment goals, professional fund managers will bring capitals from individual investors together, and invest them in stocks, bonds, currencies or other suitable investment tools in different markets.

Benefits Of Fund Investment

Fund provides individual investors simple investment methods with benefits including:

Vast Selection Minimum investment amount for funds is usually around 1,000 to 2,000 US dollars. Investors indirectly hold dozens of stocks when they buy the fund since normally fund is held at least forty to fifty stocks, some of which are blue chips. Investors need a large amount of money in order to directly hold relevant stocks.

Global Investment If investors want to engage in global investment market and get access to the investment potential of emerging market, fund investment is a very convenient and cost effective way to seize global investment opportunities while avoiding excessive concentration of capital in single market or tool.

Risk Diversification Fund managers will invest in less correlated securities to spread the risk, such as investing in different regions, industries or tools. Even if one of the securities or tools is affected by economic factors and results in losses, other profiting securities will offset the loss and spread the risk for investors.

Professional Management Fund managers make investment decisions and manage risks based on in-depth study of basic factors such as individual stock, industry and economic environment. Individual investors usually do not have enough time and resources to do such analysis.

Categories Of Funds

Currently, there are more than one thousand and eight hundred funds sold in Hong Kong approved by the Hong Kong Securities and Futures Committee. According to their investment objectives and policies, they can be broadly divided into the following categories:

Asset Allocation Fund A balanced portfolio, invest in global equities, bonds and currency markets. Typically the investment do not exceed a certain percentage in a particular asset class.

Equity Fund As its name suggests, this type of funds is mainly invested in equities. Equity share is usually no less than 70% of the fund’s asset. Some of this type of funds are invested in local stock or global stocks, while others are invested in blue chips or shares of small stock companies.

Bond Fund This category of funds is primarily invested in bonds and other fixed-income securities. Bond share is usually no less than 70%. Issuers of these bonds include government and enterprises.

Money Market Fund This type of funds is primarily invested in short-term money market instruments, such as government bills, regular bills, bank deposits, and etc. The term is usually less than one year.

Warrants or Derivatives Fund They are primarily invested in warrants and leveraged financial instruments, such as futures, forwards, options, etc.

Other Categories of Fund Including convertible bond funds, guaranteed funds, fund of funds, etc.

Our professional financial consultants are glad to provide detailed information and professional analysis for you.

How To Make Money Through Fund

There are usually two ways to profit from fund investment:

Dividends Interest income distributed regularly or irregularly by the fund. Dividends can be distributed in cash or reinvested in the fund.

Capital Appreciation When the stocks and bonds held by the fund appreciate, the fund portfolio will appreciate at the same time.

Relatively speaking, the majority of fund categories has high risk than bank deposit. Generally, the greater the potential of return, the higher the risks involved, and vice versa. Investors better consult professional financial advisers to decide which funds are for you.

Cost averaging refers to buying fund units regularly using a fixed amount of money. With this strategy, fewer units can be bought when unit price rises, and on the contrary, more units can be bought when unit price falls. The advantage is relatively low impact of market fluctuations on investors, who do not need to stay close to the market for purchasing funds. The prevalent monthly fund scheme is adopting this strategy.

Month Monthly Contribution
Fund Price
Fund Purchased
Fund Account Value
Jan. $1,500 $25 60 $1,000
Feb. $1,500 $20 75 $2,700
Mar. $1,500 $15 100 $3,525
Apr. $1,500 $20 75 $6,200
May $1,500 $25 60 $9,250
Total Contributions: HK$7,500. Total Purchase: 370Units ↑ up 23%
Charges Of Different Fund Categories

General fund charges include initial charge and management annual fee. Some funds have redemption fee or performance fee. Charges of different fund categories are as follows:

Fund Catogory Initial Charge Management Annual Fee Redemption Fee/ Performance Fee
Money Market 0% - 2% 0.25% - 1% Differ. The more complex the investment vehicle, the higher the charge.
Bond 3% - 5% 0.5% - 1.5%
Equity 5% - 6% 1% - 2%
Warrant 5% - 7% 1.5% - 2.5%
Ways To Buy Fund In Hong Kong
  • Fund manager
  • Retail bank
  • Private bank
  • Insurance company
  • Independent financial advisor
What Guarantees I Get To Purchase Funds In Hong Kong

In fund investment, investors’ fund assets are separated from those of fund managers. Independent trustees supervise fund trading; Hong Kong SFC carries out General regulation.

How To Pick Your Own Funds

Investors should consider the following factors when investing funds:

  • Personal circumstances: such as investment objectives, risk tolerance
  • Fund manager: such as reputation, experience, asset volume, service
  • Fund performance: refer to fund track

Investors should better consult a financial adviser. Our professional financial advisers are glad to provide detailed information and professional analysis to help you pick your own funds.

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