Is Investing 500,000 VND in Stocks a Good Idea?

Investing in stocks has become an attractive prospect for many individuals seeking higher returns than other traditional investment avenues. However, stocks also carry a significant risk of loss if investors lack the necessary time, knowledge, financial analysis skills, and risk tolerance. As a result, newcomers often start with a small amount of capital, sometimes as little as a few million VND or even a few hundred thousand VND. Nonetheless, experts advise against investing a minuscule amount in stocks, as the potential risks may outweigh the benefits.

A common recommendation from financial experts is to consider open-end funds as a safer alternative to stocks, offering better returns than savings accounts while providing more control over risk.

But what exactly are open-end funds, and how can one participate in this investment avenue? We had the opportunity to discuss this and more with Mr. Vo Trung Cuong, Fund Management Director of Thanh Cong Asset Management JSC (TCAM).

Reporter: Many people with a small amount of disposable income, around 500,000 VND per month, are advised to invest in open-end funds for safety and stable returns. Can you elaborate on this investment option?

Mr. Vo Trung Cuong: I don’t think there’s a specific amount required to invest in fund certificates or open-end funds. It depends on factors such as investment goals, financial capabilities, and the level of risk one is comfortable with. However, it’s essential to consider the minimum investment amount required for each fund before making any decisions.

Open-end funds are a form of indirect investment in securities where multiple investors pool their capital and entrust it to a fund management company. The company’s seasoned investment experts then allocate this capital into carefully selected stocks or bonds based on the fundamental analysis of the issuing companies and the market valuation of the securities. This approach aims to generate profits for investors over the medium to long term.

When an investor purchases units in an open-end fund, they acquire a certain number of fund certificates proportional to the amount invested and the actual purchase price on the transaction date. Over time, as the securities in the fund’s portfolio change, the value of the fund certificates also fluctuates, allowing investors to sell a portion or all of their holdings to realize their profits.

Currently, most open-end funds in the market have a minimum investment requirement of 100,000 VND. So, with 500,000 VND, investors can confidently explore and participate in open-end fund certificate investments.

What are the potential profits and losses associated with this investment type?

+ Like any other investment, fund certificates can experience losses when their value decreases compared to the initial purchase price. Therefore, investors should conduct thorough research before committing to fund certificate investments. It’s important to view this as a long-term investment and refrain from hastily cutting losses if the fund underperforms in the short term.

Fund certificates are typically considered a long-term investment option (preferably over 1-2 years) as it takes time for fund managers to research and construct an optimal portfolio, and for the assets to grow sustainably. Open-end funds generally focus on sustainable growth rather than speculative high-risk strategies for short-term gains. The longer you hold the fund certificates, the lower the sales fees become.

– How can one participate in this investment option?

+ Investors interested in fund certificates can gather information about the funds through their distributors, such as securities companies or banks, or directly contact fund management companies for advice and guidance.