Fund certificate is the most popular form of investment today. So, what is a fund certificate? How to invest in fund certificates in the stock market? Please refer to the article below.
What is a fund certificate?
Fund certificate (CCQ) is a product that represents an investor’s basic right to the capital contribution he or she has contributed in an open-ended fund. This type of securities proves that investors agree to contribute capital to form a public fund of fund management companies on the market.
Also according to Article 4 of the Securities Law 2019: Fund certificates are securities that certify investors’ ownership of a portion of capital contributed by a securities investment fund.
FIND OUT MORE ABOUT FUND CERTIFICATES
Basically, investment funds are established with the role of circulating cash flows in the market. Those who have idle money will contribute capital to form an investment fund. Money in the fund is used to invest in products on the stock market. The fund certificates regarded as evidence to determine investors’ capital contribution; thereby, receiving appropriate profits.
Usually, investment funds will not focus on selecting a single product on the stock market. With the principle of not putting all your eggs in one basket, the fund will diversify its investments into different securities and portfolios. This is for the purpose of spreading risks, ensuring the highest return for investors.
For public investment funds in general, and other investment funds in particular, investors do not have day-to-day control over how investment decisions are made. All decisions are made by the fund management companies.
The establishment of fund management companies in the market is approved by state law. As a result, there is no way investors’ money is used for unclear purposes.
WHAT IS FUND CERTIFICATE INVESTMENT?
Investment in fund certificates means that an Investor uses his/her own money and contributes capital to form a public investment fund (hereinafter referred to as open-ended fund). Then receive back a certificate called a fund certificate as proof that the investor has contributed capital to the fund. At the same time, when the investment fund is profitable, it will divide this amount in proportion to the amount of initial contribution as prescribed.
Next, the main operating principle of investment funds is: diversify investment channels, do not focus on a single product. Thereby ensuring profitability as well as minimizing risks to the maximum extent. Bring a sense of security to investors.
The world stock market in general and Vietnamese in particular has a variety of investment products. However, it is still mainly stocks, bonds and fund certificates. How to specifically distinguish these products and find the right investment decision?
FUND CERTIFICATES VS SHARES
If shares are issued for the purpose of raising capital of a company dealing in a particular industry, then fund certificates are the means to establish a securities investment fund at fund management companies.
Next, fund certificates holders do not have any voting and management decisions in the fund management company. In contrast, holders of common stock have the right to vote and manage the operations of the company. They can influence a company’s investment decisions.
Third, holding stocks requires investors to have knowledge and thinking about securities. Because every decision to buy, sell or keep shares is made by the investor himself. Loss or profit is up to them to decide. Meanwhile, holding fund certificates only need to contribute capital, and how to invest and how will be responsible for the fund management company.
Investors only need to care about the profit they will receive in proportion to the amount contributed if the investment results are profitable.