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Capital MarketNEWS

Poor Understanding of Mutual Fund Causes Investors to Hoard Risks

Investors drafted on the floors of the Nigerian Stock Market have continued to hoard investment risks as a result of poor understanding of mutual funds.

Considering the importance of mutual funds as collective investment vehicles with lower risks, the Arunma Oteh-led administration at the Securities and Exchange Commission, SEC, has consistently advised investors to tread less on the path of risk, through mutual funds.

Oteh has said she was targeting about five million investors through mutual funds in a five-year period, hoping to do this through a raft reform step that requires fund managers to report their net asset value (NAV), performance, holding and redemption figures.

“We can categorically state the apex regulator of the Nigerian capital market has put in a lot of effort to sanitise the market and create more awareness.

As at December 6, 2013, the net asset value of collective investment vehicles or mutual funds regulated by the SEC was about N150 billion.

A mutual fund is a type of professionally-managed collective investment scheme that pools money from many investors to purchase securities. It is most commonly applied to those collective investment vehicles that are regulated and sold to the general public.

Mutual funds are generally classified by their principal investments. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds, and hybrid funds.

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