Kathmandu, Aug 8: As soon as the fiscal year 2081/82 ended, mutual funds in Nepal started announcing dividends. So far, 17 schemes have declared dividends for their unit holders, with returns going as high as 20 percent.

The base value of mutual fund units is Rs 10. Dividends are calculated on that amount. For example, if a scheme declares a 20 percent dividend, it means Rs 2 per unit.

Schemes that announced 19 to 20 percent dividends are currently trading around Rs 11.50 per unit in the market. Based on net asset value (NAV), these funds are available at a discount of 15 to 20 percent. With discounted prices and cash dividends, mutual funds have become quite attractive.

Schemes declaring lower dividends are trading below their base value. Units offering around 5 to 7 percent returns are trading between Rs 9.50 to Rs 10.

There are two types of mutual funds in Nepal: open-ended and closed-ended. For closed-ended funds that haven’t gone into book closure yet, investors can still buy from the secondary market and get dividends.

Currently, 38 closed-ended funds are listed on the secondary market under various names. In addition, there are 10 open-ended funds. Open-ended funds can only be bought or sold through designated banks and financial institutions. They are not traded in the secondary market.

Open-ended fund transactions happen at NAV prices. They can also be purchased through a Systematic Investment Plan (SIP), where fixed amounts are invested monthly or quarterly and units are deposited in the investor’s beneficiary account.

Right now, there’s a chance to earn up to 20 percent returns by buying mutual fund units at near face value. Lakshmi Unnati Kosh has declared a 20 percent dividend, and Sunrise Bluechip has announced 19 percent. Lakshmi Unnati's market price is Rs 11.58 per unit, and Sunrise Bluechip's is Rs 11.45.

Since these schemes haven’t gone into book closure yet, investing now would make you eligible for dividends. Some schemes are offering dividends even when their units are trading below the base value.

Historically, mutual fund dividends tend to rise when the stock market picks up. Since mutual funds invest mostly in the stock market, a bullish trend usually means better returns for fund holders.

For the general public, investing in mutual funds is easier. Even without deep knowledge of the stock market, people can invest and earn good returns. That’s because mutual funds are managed by fund managers who include financial experts, auditors, and technical analysts.

This means investors don’t have to monitor the stock market closely, nor do they need to sacrifice time from their other jobs or businesses.

People’s News Monitoring Service