Funds Perspective

At each life stage we have different goals, such as buying a dream house, providing quality education for children and preparing for comfortable retirement. A well-established wealth management plan can make our dreams come true through wealth accumulation. However, we might find ourselves too busy to handle our financial affairs in daily life, thus letting investment opportunities slip through our fingers. In the hustle and bustle of city life, investing in funds can be a good way for us to accumulate wealth.

What are Funds?

Funds are collective investment schemes managed by professional fund managers according to pre-determined investment objectives. Funds can be generally classified into money market funds, bond funds, balanced funds, equity funds and derivatives funds based on investment objectives and policies. A fund is quoted either by its net asset value (NAV) or bid/offer. In general, the fund price published in newspaper and other media is as of the previous dealing date. Fund price is calculated on the basis of the NAV of the securities basket held and the number of outstanding units. Fund investment involves mainly two types of fees: initial subscription fee and management fee. Performance fee may also be charged by the fund manager for funds involving complicated financial instruments (e.g. a hedge fund).

Benefits from Fund Investment

Many people in Hong Kong trade stocks on their own as they may have concerns regarding fund investment, such as the loss of independent decision making and high handling fee. In fact, by investing in funds you can enjoy both local and overseas investment opportunities in an easy and cost-effective way. You can also avoid concentrating all your investment risk by diversifying into different geographical regions, sectors and securities. At the same time, you can enjoy professional fund management services including in-depth analysis and research into investment markets and securities, and professional decisions made in line with the market trend. You can also dispense with the time and effort needed to conduct your own research and avoid transaction costs. In addition, funds open to public investors must be authorised by the Securities and Futures Commission (SFC), which means they must satisfy the basic standards of operation, disclosure, investment policy and promotion set by the SFC. Fund assets are kept by a trustee or custodian and separated from the assets of the trustee or custodian in order to protect the interest of the investors.

Tips for Fund Selection

Currently, there are about 2,000 funds authorised by the SFC and offered to the public in Hong Kong. From these funds, how do we make a selection?

Step 1:
Assess your own financial situation and determine the investment budget that you can afford.
 
 
Step 2:
Recognise your investment objectives. If you are seeking capital appreciation, you may consider having more positions in equity funds. If you are looking for a stable income, you may consider investing in bonds or equity funds that provide a fixed income. You should also consider at which life stage you are and define your affordable investment tenor and your risk appetite, in order to choose the suitable fund.
 
   
Step 3:
Make your selection according to your market preference. You should read carefully the fund information such as investment objectives, strategies and fees stated in the key fact statements (KFS), offering documents and fund fact sheets to decide whether the fund fits with your own investment objectives and needs. Be aware not to make any investment decisions solely on the basis of the fund's past performance.

We hope the above information can help you make full use of different types of investment tools to allocate your assets for wealth growth.

Risk Disclosure

This promotional material is for reference only. It does not constitute any offer, solicitation or recommendation to the purchase or sale of any investment products or services.

Investment involves risks. The price of investment products may go up as well as down. Part of the investment may not be able to liquidate immediately under certain market situation. You should assess your financial situation, investment objectives and experience, risk acceptance and ability, and understand the nature and risks of the relevant product before making any investment decisions. For the nature and risks involved of individual investment product, please refer to the relevant offering documents. You should seek independent financial advice before making any investment decision. Certain mutual funds and unit trusts ("Investment Funds") are structured products involving derivatives. The investment decision is yours but you should not invest in any Investment Fund unless the intermediary who sells such Investment Fund to you has explained to you that such Investment Fund is suitable for you having regard to your financial situation, investment experience and investment objectives.

This promotional material is issued by Bank of China (Hong Kong) Limited. The contents of this promotional material have not been reviewed by the Securities and Futures Commission of Hong Kong.