The only guide you need to understand FMR Report in 2023
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Mutual funds can be the best investment option in Pakistan only if you understand how to use them. This is because there are so many different types of mutual funds in Pakistan, so many categories and subcategories to choose from, and Islamic and non-Islamic options. It becomes confusing.
No more!
We have designed this comprehensive guide in such a way that each question will build your concepts step-by-step.
Basic Important Questions about Mutual Funds in Pakistan:
Written by Furqan Punjani (LinkedIn profile) who has more than 15 years of experience in investing and financial services in Pakistan.
All the numbers and data are updated as of Jan 2023
Q. What are mutual funds and how do they work in Pakistan?
The primary difference between conventional and Islamic/Shariah Compliant funds is that Islamic funds can only invest in assets or instruments that are approved by an Islamic Board.
Whereas conventional funds can invest in any asset class or instrument, be it non-Islamic or Islamic if it is allowed by their offering documents.
For example, a conventional stock fund like the UBL Stock Market fund can invest in both Islamic and non-Islamic companies like insurance and banks but Meezan Stock Fund cannot invest in any non-Islamic company.
Q. How many mutual funds are in Pakistan?
Cash or Money Market funds can invest only in short-term papers issued by the Government of Pakistan. Their returns are very close to interest rates in Pakistan and follow its direction. This means if the interest rates go up, returns by cash funds will increase while if interest rates fall down, their returns also fall down.
On the other hand, Shariah Complaint Cash or Money Market funds can only invest in short-term Islamic sukus issued by the Government of Pakistan. They are not allowed to invest in non-Islamic short-term papers issued by the Government Of Pakistan. Here again, the returns follow interest rates announced by the State Bank of Pakistan.
Following is the list of Money Market or Cash Funds offered in Pakistan:
Q. What are the different types of Mutual Funds in Pakistan?
There are 4 types of mutual funds currently operating in Pakistan.
- Open-ended funds - These funds are bought directly through mutual funds office and can be redeemed/sold through them only.
- Close-ended funds - These funds are listed at the stock market and can be bought and sold through stock market brokers
- Pension or Retirement Funds - These funds are directly bought and sold through mutual funds offices.
- Exchange Traded Funds - These funds are listed at the stock exchange and the inflow and outflow to the fund can only happen through the brokerage account.
Open-ended Funds in Pakistan:
This is the biggest type of mutual fund in Pakistan having more than 1355bn as assets under management. This data is updated as of November 2022 by the Mutual Funds Association of Pakistan (MUFAP).
In Pakistan, open-ended funds are issued directly by mutual funds at a Net Asset Value (NAV). Investors can buy these units directly from mutual funds through mobile or web applications or through their sales agents. Mutual funds usually keep the custody of these funds with themselves only however, if an investor has a CDC Access account, he can ask the mutual fund to transfer these units into his CDC account.
When an investor wants to withdraw their money, he will then sell these units to the mutual fund at that day’s closing NAV price.
Other things to note are that a few mutual funds charge front-end or back-end loads when an investor buys a fund or when he sells the units (detailed answer below).
The open-ended funds can be further divided into sub-categories (see the answer below)
Close-ended Funds in Pakistan:
They use to be very popular from the 2005-2013 era but now there aren’t many of them. They were converted into open-ended funds between 2014-2017.
Under a close-end mutual fund scheme, an investor participates in the IPO for that fund and so the initial units are sold by the mutual funds. However, post the IPO the units can only be sold or bought through the secondary market i.e. the stock exchange it’s listed.
In other words, the fund trades like a company on the stock exchange. The Mutual funds unit holder becomes the part owner of the fund (see below for a comparison between ETFs and close-end mutual funds).
In Pakistan, SECP doesn’t allow the creation of new close-end funds however there are still a few closed-end funds listed at the Pakistan Stock Exchange i.e. HBL Growth Fund, HBL Investment fund, etc.
Retirement/pension funds in Pakistan:
It is one of the fastest-growing fund categories in Pakistan yet very small compared to open-ended funds. As of November 2022, different mutual funds were managing more than Rs43bn as per the data by the Mutual Funds Association of Pakistan (MUFAP).
If an investor wants to start a life cycle investing in Pakistan for retirement or pension, this option can be very feasible for them. Under the life cycle of investing, mutual funds will change the allocation of the funds according to the age and risk profile of the investors.
Other than that, if an individual is employed and has an employer-funded provident or gratuity fund scheme, he can also convert that into a pension scheme offered by a mutual fund.
Exchange Traded Funds in Pakistan:
This is the most recent offering by the mutual funds in Pakistan but it hasn’t gotten any major interest from investors in Pakistan.
As of the November 2022 report by the Mutual Fund Association of Pakistan (MUFAP), the total fund under management was just Rs733mn.
There are in total 7 Exchange-traded funds in Pakistan. Out of these 6 invest in the stock market and only 1 invests in risk-free government papers.
The Advantages of Exchange-traded Funds in Pakistan
- Their management fee is much lower than investing directly through open-ended mutual funds. For example, stock funds charge a 2% management fee whereas these funds charge in the range of 0.5% to 1% (reference Mufap – link)
- Mutual funds are allowed to choose any stock and can increase or decrease their allocations of stocks as per their understanding of the stock market however ETFs in Pakistan have an already-announced basket of stocks that they invest in.
- You can sell these directly through your brokerage account (hassle free) whereas if you are an open-end fund investor you can only file a repetition through a mutual funds’ app only.
- After selling the ETFs your funds become free to invest in any other stock hence switching becomes very easy whereas, with open-ended mutual funds, you have to wait for 2 days for the fund to be realized.
- Market makers are always present which makes ETFs in Pakistan the most liquid type of assets that can be traded through the stock exchange.
The disadvantages of Exchange-traded Funds in Pakistan
- Most of the Exchange-traded funds track only a basket of blue chip stocks which haven’t been performing that well in Pakistan since 2017 (except JS Momentum Fund). Due to this, the returns are lower and hence investors are staying away from them.
- The cost of entry is higher since an investor has to pay a minimum commission to the broker i.e. Rs0.01/unit whereas most of the open-ended funds don’t charge a front load which makes the investment fee less.
Q. What are Asset Allocation funds in Pakistan?
Through Asset Allocation Funds in Pakistan, an investor allows a mutual fund to rotate its funds as per market conditions.
A fund manager can go up to 90% in risky assets like stocks if he thinks stocks will do well or can be 90% in risk-free assets like government papers if he thinks safety should be preferred right now. It’s up to mutual funds’ discretion to choose the allowed asset classes and their percentages.
Shariah Compliant Asset Allocation Funds in Pakistan will do the same except that his allocations will always remain in Shariah Complaints assets classes.
Since it’s up to the mutual fund when to switch between risky and risk-free assets, the returns vary from mutual fund to mutual fund. For example, in 2022, the best-performing asset allocation fund in Pakistan gave its investor a return of 14% while the worst-performing asset allocation fund gave a return of negative 16%.
The same was true for shariah compliant asset allocation funds also. The best asset allocation fund gave its unit holders a return of 13% in 2022 whereas the worst fund gave a negative return of 15.5%.
Therefore, it is advised to all investors to carefully read their fund manager report (we had written a detailed article on How to read a Fund Manager Report – here is the link) and also follow their historical returns before investing in any fund.
Q. What are Balanced Funds in Pakistan?
Like Asset Allocation funds, Balanced Funds in Pakistan can also rotate investors’ money from less risky assets (government papers or bonds) to more risky assets (stocks) on their own. However, the maximum limit to go in stocks (the riskiest asset class) is 70%. This means they cannot invest more than 70% of an investor’s money into stocks.
On the flip side, a mutual fund isn’t allowed to bring the stock allocation down from less than 30%. This means at any given time, 30% or more of the investor’s money will be invested in stocks.
This makes it a little riskier than Asset Allocation funds in Pakistan.
The same rules apply to the Shariah-Compliant or Islamic Balanced Funds however they can only invest in shariah compliant stocks and sukuks.
Once again, since a mutual fund manager decides the time and percentage allocation of the fund, the returns between a mutual fund and to mutual, vary a lot. For example, in 2022 the best-performing conventional balanced fund in Pakistan gave its investors a negative return of 8% while the worst-performing fund gave its investor a negative return of 14.44%.
The same is true for Shariah complaint balanced funds in Pakistan. However, as per MUFAP, there is only one shariah compliant balanced fund in Pakistan which Meezan Balanced Fund.
Q. What are Stock Funds or Equity Funds in Pakistan?
Stocks Funds or Equity Funds in Pakistan are considered to be the riskiest asset class since these funds purely invest in stocks of listed companies and the returns are primarily dependent upon individual stock performances and their dividends.
Since economic conditions impact stock prices the most, returns of Stock Funds in Pakistan vary from year to year and require long-term capital allocations.
A Stock Fund Manager himself decides which stock he wants to have in his portfolio, at what price he wants to buy or sell it, and how much he wants to buy. This means that returns may differ from mutual fund to mutual fund.
According to the rules by SECP, stock funds, at all times, must have at least 70% of their allocation into stocks.
A conventional stock mutual fund is allowed to invest in every stock that is listed on the Pakistan Stock Exchange regardless of the industry they operate in, debt levels they have or any their
However, Shariah Complaint stock funds have a list of approved stocks by their Shariah board that they can invest in. Usually, Islamic Stock Funds aren’t allowed to invest in Banks, Insurance, companies that have non-halal business models like breweries and cigarette manufacturers, companies that have too much debt from non-Islamic banks, and companies that earn interest income on their cash reserves.
Since stock picking requires a full team with the mutual fund, Stock funds in Pakistan charge the highest amount of fee from their customers. The management fee usually is 2% but depending on the trading activity of a fund, the total expense ratio can be as high as 4%. So in this example, if the fund makes a 20% return a year, the investor will get to keep only 16% and if the fund makes a loss of 10% the investor’s actual loss would be 14%.
Q. What are Commodity Mutual Funds in Pakistan?
There is only one commodity mutual fund in Pakistan which Meezan Gold Fund.
This is a shariah compliant or Islamic fund through which you can buy digital gold in Pakistan.
Meezan Gold fund buys physical delivery of the gold and unit holders of this fund can benefit from:
- A rise in the gold price in the international markets and
- It hedges the investor from rupee depreciation against the dollar
Meezan Gold fund must, at all times, maintain at least 70% of its assets in physical gold however if the fund cannot procure physical delivery of gold from the open market, it may stop the inflows from investors.
It was the best-performing mutual fund for 2022 as it gave its investors an absolute return of 29%. (see our 2022 mutual fund performance report here)
Practical Guide to Investing in Mutual Funds in Pakistan:
All the numbers and data are updated as of Jan 2023
Video version ⬇️
By the way, we wrote a similar detailed guide on direct stock market investing also “20 Most Important PSX / Stock Market Questions answered here”.
Q. Which Mutual Fund should I invest in?
Choosing a mutual fund in Pakistan depends on 2 things and they are:
- How much risk can you take?
- After how long do you intend to take out the money from the mutual fund?
How much risk can you take?
In investing terms, the risk means you are fine seeing your investment lose value in the short or medium term. This is the risk of capital loss. If you are fine with it, then your risk appetite is higher and hence might want to look at risky asset classes like stocks, asset allocation funds or balanced funds.
However, if you can’t stand to see your investment value go down and are willing to let go of a chance to make higher returns, then risk-free or less risky asset classes like cash funds or income funds are for you.
Time horizon you have
If you are investing for:
- Passive income and don’t rely on this investment to fund your house expenses, or
- If this investment that you are thinking to do is just a small portion of your overall wealth, or
- You are young and saving for an expense like buying a car or a down payment for a house loan which will happen after two years at least
then you might have a longer horizon and should consider investing in risky mutual funds.
But if you are:
- Closer to your retirement and intend to use this fund for retirement expenses or
- The investment you made was for expenses that are bound to happen within two years like a child’s college fees or marriage
then you might want to stay away from risky assets and keep your investment in risk-free mutual funds
Q. Which mutual funds are the best?
In 2022, Meezan Gold Fund had the highest return given by any mutual fund in Pakistan. This was because gold prices in the international markets went up and the rupee depreciated by 30%.
These are best mutual funds in 2022!
However, this is not a guarantee for future returns.
If you think economic issues faced by Pakistan would be resolved in 2023 or that Pakistan won’t default on its international debt repayment commitments, then you might want to go into risky asset classes like stocks, income funds, balanced funds or asset allocation funds.However, if you think that even after IMF’s loan and fall in commodity prices, Pakistan’s economic situation may stay precarious then you might want to look at risk-free mutual funds like the money market or cash funds.
Other than the fundamental outlook that will help you to choose the category of a mutual fund, you might want to look at two things:
- If two funds are giving the same kind of returns but one is charging a lower fee vs the other then a lower fee-charging mutual fund might be best for you to choose, and
- Historical returns also tell about a mutual fund’s manager. If a fund is consistently performing better than its benchmark and other mutual funds, that might be the best mutual fund for you to choose.
Q. What are the risks involved in investing in mutual funds in Pakistan?
Investing and risks go together. There is no investment product in the world that doesn’t carry risks and investing in a mutual fund is no exception.
These are the risks with practical examples from Pakistan that you should always have in your mind before investing in mutual funds:
Market fluctuation risks:
Whatever investment instrument a mutual fund would buy, will be subject to going up or down. If it goes up, we will it returns and if it goes down, we call it risk. Other than money market funds in Pakistan, almost all the other categories carry this risk. In 2017-2018 or 2022, stocks fell as low as 20-30%, and hence all the sock market investors saw losses in their investments.
Liquidity risks:
In 2008 mutual fund investors weren’t able to take their money back from the mutual funds. This happened because the liquidity was so short in the markets that mutual funds couldn’t sell their investment to give money back. This is called Liquidity risk. It can also happen if one of the investments that the mutual fund has made goes bankrupt. Then there will be some loss of capital to investors but overall the system will keep working. This is a similar example of Liquidity risk but on a smaller scale.
Interest rate risks:
As explained above, income funds, balanced funds, and asset allocation funds invest in long-term government bonds. And if after buying an instrument from the government or any company, interest rates go up the value of the investment falls. This is called Interest Rates Risk.
Fund Manager’s risk:
The performance of any mutual fund is dependent on the experience, knowledge, expertise, and investment techniques adopted by the fund manager, And if the team lacks any of the above, it may hurt the fund’s performance. So it is advised to see a fund’s historical performance vis-a-vis its benchmark. All the details can be found in their fund manager reports.
Concentration risk:
This risk is very common in Pakistan and any savvy investor can see if a mutual fund is overly exposed to any stock or any sector, particularly in stock funds. Although SECP has some limitations as to how much money can a mutual fund put into one sector or stock, however, the risks still prevail if a mutual fund has used this limit to just buy one stock from one sector and create a concentration. The risk materializes when that particular stock falls more than the overall market and investors see major losses.
Timing risk:
Asset Allocation and Balanced funds are allowed to rotate their funds between debt and stocks and if their timing to do the same goes wrong, investors pay the losses. This can also happen in stock funds. If a mutual fund decided to increase the allocation of stock and soon after that it falls, it will also be called a timing risk. Or if a stock fund sells a stock and it goes up, it will be the same risk to investors.
Q. How can investors in Pakistan research and evaluate mutual funds before investing?
These are the practical steps that an investor in Pakistan should follow before investing in any mutual funds:
Step 1: Reviewing the fund’s prospectus or fund manager report:
If reviewing the prospectus is too much for you since it can be 100s of pages, just open the latest fund manager report and you will find all the details about their fee, expense ratios, how they invest, which asset classes do they invest in and what is the benchmark they are trying to beat. Most of the information will be easy to understand however if you still need some hand-holding, read this detailed step-by-step guide to understand the fund manager report. Other than this, Mutual Fund Association compares the returns of all the categories of mutual funds which can also be helpful to investors before deciding which mutual fund should they choose.
Step 2: Analyzing the fund’s portfolio:
Once you are in the fund manager report, do look at the details of their investment and see if they align with whatever you know about the market. For example, if you think that in low economic growth, environment cement and steel don’t perform well and a mutual fund has a big investment in these stocks then you should stay away from this fund. Or for example, if you think that interest rates will further go up and the income fund you are looking at has locked in its money on lower interest rates, then this fund will have a loss when interest rates go up. Better to stay away from this fund.
Consulting with a financial advisor:
This is a new phenomenon in Pakistan but this is the best way to go. A financial advisor would have a lot more experience than the investor and hence he/she should be able to guide an investor better about:
- which mutual fund should he choose,
- which mutual fund or category would meet his requirements best,
- which mutual funds charge the lowest fee while having the same kind of returns etc.
But before choosing make sure that person isn’t being paid to push one mutual fund over the other. Otherwise, he will be doing himself a favor and not you while charging you a fee.
If you want us to help you, you can drop us an email at [email protected]
Q. Who should invest in Cash or Money Market Funds in Pakistan?
You should invest in the money market funds in Pakistan if:
- You want risk-free returns that have no chance of a loss.
- You are happy with low but guaranteed returns.
- The amount you have is available for a short-term or
- You think that other asset classes like stocks will not grow due to economic factors
Q. Who should invest in Income or Fixed Income Funds in Pakistan?
You should invest in the Income Funds in Pakistan if:
- Your investment horizon is longer.
- You want to make a higher return than money market funds and hence you are willing to take some risk
- The ideal time to invest in these funds is when you think that interest rates will not further go down. This is because they may give capital gains when the interest rates start to fall.
Q. Who should invest in Asset Allocation Funds in Pakistan?
You should invest in the Asset Allocation Funds in Pakistan if:
- You have a longer time horizon for investment since asset allocations funds are allowed to rotate the investment between risky and non-risky assets
- You want to make returns from stocks and income funds but you are not experienced enough to decide the timing or stock selection
- You are confident the mutual fund you are giving your money has proven in the past that it could take better decisions of allocations.
Q. Who should invest in Balanced Funds in Pakistan?
You should invest in Balanced Mutual Funds in Pakistan if:
- If you have a longer investment horizon since at all times 30% of your money will always be invested in stocks
- You want to make returns from stocks and income funds but you are not experienced enough to decide the timing or stock selection
- You are confident that the mutual fund you are giving your money to has proven in the past that it could take better decisions of allocations.
Q. Who should invest in Stock or Equity Funds in Pakistan?
You should invest in Stock or Equity Fund Mutual Funds in Pakistan if:
- Your investment horizon is longer
- You don’t possess the skill set to look at companies your self or if you are busy and can’t do it on your own
- You are OK to see your investment value fall in the short or medium term
- You are confident that the mutual fund you are giving your money to has proven in the past that it could take better decisions of allocations.
Q. Who should invest in Meezan Gold Fund in Pakistan?
You should invest in Meezan Gold Fund in Pakistan if:
- You think that Gold prices in the international markets will go up
- You think that the rupee will lose its value against the dollar
- You think there will be high inflation in the global economies
- You have a longer time duration since gold prices sometimes become very volatile
- You don’t want to risk buying physical gold yourself due to security concerns
Q. Do mutual funds pay monthly income?
Yes, mutual pay monthly income or profits to their unit holders in Pakistan.
However, to get monthly profits, you inform your mutual fund or mark the “monthly withdrawal option” in the investment form.
An investor needs to mark the section highlighted above to get monthly profits deposited into this bank account every month.
Please note that mutual funds use different language to mark this section however every investment form will have a section like this according to the law.
Q. What are the fees and expenses associated with investing in mutual funds in Pakistan?
In Pakistan, mutual funds typically charge fees and expenses to cover the costs of managing and administering the fund. These fees and expenses can include the following:
Management fee:
This is a must fee that all investors have to pay to the mutual fund to manage their money. It is charged by the fund to cover the costs of managing the fund’s investments and is charged every month from your investment. They are the lowest in the money market or cash funds (usually in the 0.3%-1% range) and keep increasing with the risk of the fund. This means that stock or equity funds will charge the most management fee (usually 2%).
Expense ratio:
This is over and above the management fee that mutual funds charge in Pakistan. This covers the mutual fund’s operating expenses like trading fees, accounting and legal expenses, and audit fees. This is usually charged every month like the management fee. Also, note that it is not a fixed fee, it changes every month. If a mutual fund has done a lot of trading activity then the expense ratio for that month will be higher than in previous months and vice versa.
Sales load:
This is a fee that investors pay when they invest in a mutual fund. It is usually expressed as a percentage of the investment amount. A 1% sales load means that out of your Rs100, only Rs99 will be invested and Rs1 will go to the mutual fund. But this is dependent upon the category of the fund. Cash funds and Money market funds don’t change this but high-risk funds like aggressive income or stock funds might charge this fee from their investors.
Redemption fee:
Some funds may charge a fee when an investor sells their investment back to mutual funds, known as the redemption fee. In Pakistan, most of the funds don’t charge it but if you are unlucky and have chosen a fund that charges it, you might have to pay this over and above the expense ratio that you have already paid.
It’s important to note that these fees and expenses can vary from fund to fund, so investors should review at least look at the fund manager report before investing any fund or consult with a financial advisor.
Q. What is the fee that Stock Funds Charge?
For instance, you decide to invest Rs1000 with a mutual fund into a stock fund.
- Step 1: If the fund has a sales load of 1% then out of Rs1000 only Rs990 will be invested and Rs10 will take by the mutual fund as a sales load.
- Step 2: If the fund charges a 2% management fee then this will be deducted every month from the returns that you have made so far. If the return is negative, it will still be charged.
- Step 3: If the fund has an expense ratio of 1% then another 1% will be deducted from your fund like the management fee.
- Step 4: Let’s say you decide to take the money out and if that fund has a redemption fee of 1% then another 1% will be deducted from the money that you have invested + the returns you have made so far.
- Step 5: If you have made any returns, the mutual fund will deduct applicable taxes and finally return the money to you (more on it below)
Q. What are the tax implications of investing in mutual funds for investors in Pakistan?
Profits or returns from mutual fund income are not tax-free in Pakistan.
For individual investors in Pakistan, mutual funds charge two types of taxes.
- Withholding income tax on dividends and
- Capital gains tax
Withholding taxes on dividends
Whatever profits a mutual fund makes on the investor’s money, they give those back to unit holders as dividends. On those dividends, government charges a 15% tax as a withholding income tax. Mutual funds deduct those from the profits and deposit the same to the Government of Pakistan on your behalf.
So for example let us say that you are invested in a money market mutual fund and own 100 units of that fund. At the end of the month that money market fund announces Rs1 dividends. This means that you are eligible to receive Rs100 as dividends. However, the mutual fund will deduct Rs15 (15%) as withholding income tax and deposit the remaining Rs85 into your account.
Capital Gains Tax
This is the tax that the Government of Pakistan charges if there are any capital gains on your investment. The rate of capital gains tax on mutual fund investment in Pakistan are:
- For Money Market Funds – 10%
- For Stock or Equity Funds – 10% or 12.5%
So for example let us say that you are also invested in a stock fund with the same mutual fund. You bought 100 units at Rs10 each at the start of the year and now you want to withdraw your funds. The current price of the same unit is now Rs13. This means that you have unrealized capital gains of 30%.
At the time of the withdrawal, the mutual fund will calculate your profit i.e. Rs300 and they will deduct Rs30 as capital gains tax and deposit the remaining Rs1,270 (Rs1000 actual investment and Rs270 profit after tax) into your bank account.
Points to note:
- To start off, if you haven’t filed income tax or you are a non-filer then your tax rates are double the rates applicable to a filer. So if you want to invest in a mutual fund or stocks, the first step should be to file income tax returns or be ready for a handsome tax bill.
- Mutual funds will deduct these taxes from the profits before giving them back to you. So there is no way to skip these taxes.
Q. Are there any tax credits on mutual funds?
There are tax credits or rebates on investing in mutual funds in Pakistan. This applies to investments in all the categories of mutual funds other than retirement and pension funds. The tax rebates and credits available to investors were withdrawn by the government on July 1, 2022.
This means that you can still enjoy tax credits if you invest in pension or retirement funds.
Have a look at a simple tax-saving calculator made by Atlas Funds. here.
How to use this tax saving calculator?
Step 1: Fill in your monthly income and press calculate
Step 2: See the “Investment in Pension Funds” row to see how much money you need to invest to get tax credits
Step 3: See the “Tax saving in Pension Funds” row to know how much tax will you save on an annual basis.
In this example, a person has a salary of Rs200,000 per month. He needs to invest Rs480,000 into a retirement or pension scheme to save Rs33,024 per year or Rs2,750 per month on their tax liability to the government.
The tax credits change but a rule of thumb is, the higher your income tax slab, the more savings you can have by investing in retirement or pension funds in Pakistan.
Please note that retirement funds and VPS have a long duration and sometimes they might have a lock-in period. However, if you withdraw money from these funds, the mutual funds will deduct the tax credits or rebates given to you before returning the money back to you.
Q. What are the minimum investment requirements for mutual funds in Pakistan and is it accessible to the common investor?
The minimum investment requirements for mutual funds in Pakistan vary depending on the specific fund. Some mutual funds may have a minimum investment requirement of just Rs1000 while others might require you to invest a minimum of Rs10,000. But generally speaking, it’s very low compared to say real estate where the investment ticket size goes in the hundreds of thousands.
Mutual funds in Pakistan are generally accessible to the common investor, especially after the introduction of “Sehl and Sahulat Sarmayakari accounts”.
Through Sehl Sarmayakari account you can:
- invest upto Rs100,000 with a mutual fund with a maximum transaction limit of Rs25,000
- invest only in less risky categories like money market funds, cash funds or income funds
- the account can be opened with CNIC and a registered mobile number through the mutual fund’s online account opening process.
- the account can be funded through wallets or any bank account
Through Sahulat Sarmayakari account you can:
- invest upto Rs800,000 with a mutual fund with a maximum transaction limit of Rs400,000
- invest in all the funds offered by a mutual fund
- the account can be opened with CNIC and a registered mobile number through the mutual fund’s online account opening process.
- the account can be funded through wallets or any bank account
Here is a detailed guide on How to open an online mutual fund account.
Q. Can I withdraw money from a mutual fund anytime?
Yes, you can withdraw money from any mutual fund except capital-protected funds.
Capital-protected funds have a lock-in period. This means you can not withdraw your investment before the conclusion of the fund. It can be as small as 6 months or as high as two years. If you still had to withdraw your investment due to any emergency, you may have to forgo the profit and sometimes pay a fee.
So it is better to be sure before investing in any capital-protected fund.
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