In this blog, we will explore the world of investment funds in Turkey, we will know what these funds are and how they work, and highlight their importance and benefits to investors, and we will reveal the diversity these funds provide in investments and the levels of risks associated with them, and we will look at the expected returns and the factors that affect the performance of the funds in light of the volatility of the money market and economic factors in Turkey.
What is meant by investment funds in Turkey?
A mutual fund is a fund consisting of unincorporated assets of investment shares, established by investment portfolio management companies in accordance with applicable laws and regulations, with the aim of participating investors and operating an investment portfolio based on the fiduciary ownership of funds or other assets provided by investors in exchange for participation shares in the fund.
Types of investment funds in Turkey:
- Comprehensive Equity Fund: At least 80% of the fund's value is invested in shares of domestic or foreign issuers on an ongoing basis.
- Precious Metals Comprehensive Fund: Includes gold and other precious metals traded on the stock exchange and funds invested in capital market instruments based on precious metals.
- Comprehensive Fund Basket: Consists of participation shares in other funds and exchange-traded funds.
- Comprehensive Money Market Fund: Consists of highly liquid funds and capital market instruments with a maturity of up to 184 days and an average portfolio maturity of 45 days.
- Comprehensive Participation Fund: Consists of lease certificates, participation accounts, partnership shares, gold and other precious metals, non-interest funds and capital market instruments.
- Variable Mutual Fund: It does not fall under any of the types mentioned due to portfolio limitations.
- Free Mutual Fund: Participation shares are set up for sale to qualified investors only.
Features of investment funds in Turkey:
- The management of capital (money savers) is supervised by professionals with experience in managing investment portfolios.
- Mutual funds diversify risk by including a variety of securities in their portfolio, such as fixed income, foreign exchange, indices and stocks.
- Investors are freed from many tasks and challenges that require time and resources, such as following up on maturity and collecting returns, as securities are evaluated and monitored and interest and profits are collected by the fund management.
- Mutual funds allow access to high financial benefits that may not be achieved by individual investment with small savings.
- Investors can transfer their investments within the fund according to their needs, as the increase in the value of the fund's portfolio is reflected in its daily value.
- Investment funds in Turkey save time and money by facilitating the buying and selling of the portfolio.
Risks of investment funds in Turkey:
Although the value of the securities purchased by the mutual fund can change and be affected, and the funds can lose part of the capital invested in it, investing in mutual funds always involves risks, as not all mutual funds have the same level of risk and some funds carry high risks while others are characterized by lower risks.
Therefore, the investor information model is one of the most important measures that can be used to determine the level of risk in investment funds, and thus indicates the possibility of achieving high returns or high losses, i.e. high risk.
In general, all types of investment funds in Turkey involve different levels of risk and the same applies to the capital markets, where the risk factor is not excluded and therefore, a system was established to record the level of risk in mutual investment funds in Turkey, through which investors are informed of the risk ratios for each fund.
What is the importance of investment funds in Turkey?
The importance of investing in Turkish investment funds is evident through calculating the participation price, which is offered to investors wishing to join the fund, as it is calculated by the fund's administrative institution on all working days and the following procedures are followed in the calculations:
- The value of the fund's portfolio is calculated on the evaluation day based on the prices of the assets in the portfolio that are traded, bought and sold on stock exchanges.
- The total value of the fund is determined by adding the value of the fund's portfolio with the fund's receivables and deducting any outstanding debts.
- The unit price (unit share) is calculated by dividing the total fund value by the number of outstanding shares on the valuation day.
Returns of investment funds in Turkey:
Returns of investment funds in Turkey depend on exchange rate fluctuations and general inflation rates and the percentage of potential profit returns that can be achieved through Turkish investment funds can be estimated by the following example:
- Assuming you invest 100 TL in an investment fund with the value of 1 share, you will get 100 shares.
- If the value of the investment share drops to 0.9 TL due to the decrease in the value of the fund portfolio, you will still have 100 shares but the value will be 90 TL.
- If the share price rises to 1.1 TL, the total value of the 100 shares will increase to 110 TL. It should be borne in mind that these calculations are made in the absence of trading commissions.
- It should be noted that during the execution of the above-mentioned transactions, interest, dividends, trading gains and daily value increments realized from the assets in the Fund's portfolio are recorded as income of the Fund on the same day and thus, the investment share price is calculated on a daily basis, and profits or losses are distributed to investors at the closing of the day's trading.
Common questions:
Are there risks associated with investment funds in Turkey?
Yes, there are risks associated with investment funds in Turkey, such as money market fluctuations and unstable returns, but the levels of risk vary between different investment funds.
Does investing in investment funds in Turkey require a large amount of money?
No, investment funds in Turkey can be invested in a variety of amounts, from small amounts to larger amounts, depending on the investor's choice.
Can money be withdrawn from investment funds at any time?
Yes, in general, funds can be withdrawn from investment funds in Turkey at any time, but some funds may require a prior notice period before withdrawal.
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