💼 Mutual Funds & ETFs

🔰 What is a Mutual Fund?

A mutual fund is an investment vehicle that pools money from many investors and invests in various assets according to the fund's policy, managed by Asset Management Company (AMC) e.g. BBLAM, SCBAM, KAsset, Krungsri Asset Management as the manager

Advantages of Mutual Funds:

• Risk Diversification — even 1,000 THB can be diversified across hundreds of stocks (via the fund)
• Professional Management — Fund Manager analyzes and decides for you
• Low Minimum — some funds require only 1-1,000 THB
• Liquidity — buy-sell every business day (some funds T+1 to T+5)
• Wide Selection — ~2,000 funds available in Thailand

Disadvantages: fees (Front-end, Back-end, Management Fee), can't pick stocks yourself, NAV may be below market price

📋 Mutual Fund Types by Investment Policy

• Money Market Fund — invests in deposits, treasury bills, short-term bonds (≤ 1 year). Lowest risk. Returns close to deposit rates (~1-2% per year). Ideal for short-term parking
• Fixed Income Fund — invests in government bonds and corporate bonds. Low to medium risk. Returns 2-5% per year depending on Duration and Credit Rating
• Equity Fund — invests ≥ 65% of NAV in common stocks. High volatility. Long-term returns 7-12% per year. Must tolerate short-term volatility
• Balanced / Mixed Fund — invests in both stocks and bonds at set ratios (e.g. 50:50 or 30:70). Suitable for moderate risk tolerance
• Index Fund — tracks a benchmark index (SET50, S&P 500). No Fund Manager stock selection → very low fees (TER 0.1-0.5% vs Active Fund 1-2%)
• Foreign Investment Fund / Feeder Fund — raises funds in Thailand to invest in master funds abroad, e.g. VFAND (invests in Vanguard S&P 500), KT-ASHARES-A (China A-Shares)
• Alternative Fund — invests in Commodities, REITs, Gold, Oil Futures, Infrastructure

ETF (Exchange Traded Fund) — Funds Traded on the Exchange

ETFs are index funds that trade on the stock exchange like regular stocks (Real-time) unlike regular mutual funds that trade once daily at end-of-day NAV

• ETF advantages over Mutual Funds:
  — Real-time trading — instant price visibility
  — Lower fees (TER 0.03-0.5%)
  — Trade anytime during market hours (no waiting for NAV)
  — Can short sell (some ETFs)
• Thai ETFs (SET):
  — TDEX (SET50 ETF) — tracks SET50 index
  — 1DIV — high dividend stocks
  — META — technology stocks
  — GOLD99 — Gold
  — BMSCG — Corporate Bond
• Popular US ETFs:
  — SPY / VOO / IVV — S&P 500 ETF (fees 0.03-0.09%)
  — QQQ — NASDAQ-100 ETF (tech-focused)
  — VTI — Total US Stock Market (all US stocks ~4,000)
  — VT — Total World Stock Market (global stocks)
  — BND — Total Bond Market ETF

🧾 RMF · SSF — Tax-Deductible Funds

⚠️ Note: LTF was discontinued since 2020 — existing LTF holdings past their lock-up period can be sold without tax repayment

📐 NAV · TER · Tracking Error — Key Metrics

• NAV (Net Asset Value) — price of 1 fund unit = (total assets − liabilities) ÷ number of units. Similar to a stock price for the fund
• TER (Total Expense Ratio) — % deducted as fees per year:
  — Active Equity Fund: 1.0-2.5% per year
  — Index Fund: 0.1-0.5% per year
  — ETF: 0.03-0.5% per year
  — High TER = eats investor returns over the long term, a 1% TER difference can mean millions in returns
• Tracking Error — deviation of fund returns vs benchmark index:
  — Low Tracking Error = good (closely follows index)
  — High Tracking Error = Fund Manager may be trying to "beat the market" unsuccessfully
• Sharpe Ratio — excess return per unit of risk — higher is better (≥ 1 = good, ≥ 2 = excellent)
• Maximum Drawdown — maximum loss from peak to trough — used to assess worst-case scenario

✅ How to Choose a Fund — Checklist

1. Risk Tolerance: Level 1 (lowest, Money Market) → 8 (highest, Foreign Stocks, Commodities)
2. Investment Horizon: Short (< 1 yr = Money Market), Medium (1-5 yrs = Bonds, Balanced), Long (> 5 yrs = Equity)
3. TER: compare fees among funds with the same policy — choose the lowest TER
4. Historical Returns: check 3, 5, 10 years — but don't rely solely on past returns
5. Fund Manager: check experience and tenure managing this fund
6. Tracking Error (for Index Funds): should be < 0.5% per year
7. Fund Size (AUM): fund should be ≥ 500 million THB (too small may be liquidated)
8. Dividend Policy: Dividend payout or Accumulation — choose based on goals