FAQs - Invest (Mutual Funds & Fixed Income)

Mutual Funds

What is a mutual fund?

A mutual fund is an investment vehicle that collects money from many investors, and invests the collected pool of money in various investment avenues. The fund is managed by experienced professionals, who manage the fund, and monitor its performance on an ongoing basis.

What are the benefits of investing in a mutual fund?

Some of the major benefits of investing in a mutual fund are:

  • Tax benefits
  • Diversification
  • Professional management
  • Liquidity
  • Affordability
  • Ease of investment
  • Transparency
  • Flexibility
Is investment in a mutual fund guaranteed?

No. Mutual funds are not capital guaranteed; return on mutual funds is also dependent on the nature of the investment and the economic environment.

How long does an ideal mutual fund investor hold his investments?

There is no ideal tenor for holding an investment. However, one should keep in mind their financial requirements, risk appetite and nature of the fund they are invested in.

Can I forecast mutual funds return & dividend on the basis of past performance?

No. Past performance is no guarantee of a fund’s future performance.

Are any of the mutual funds distributed by SCBPL guaranteed by the bank?

No. SCBPL is only a distributor of these funds as licensed by Securities and Exchange Commission of Pakistan through License to Act as Securities Adviser. SCBPL and its affiliates shall not be held responsible in any manner whatsoever to any person, including but not limited to, the client(s), beneficiary or any third party with respect to the performance of the fund / plan.

Which is the riskiest investment: in an Equity fund, an Income fund or a Money market fund?

The riskiest investment is in an equity fund followed by in an income/fixed income fund and least risky in a money market fund.

What are tax-benefits?

Investment in Mutual Fund provides tax benefit by allowing the investor tax credit (as per Section 62 of the Income Tax Ordinance, 2001).

How are Shariah Compliant Funds different from Conventional Funds?

Islamic funds are different from conventional funds as their investments are limited to those that comply with Shariah Principles. These funds are carefully monitored by the Fund House’s Shariah Board/Shariah advisor to ensure all aspects of Shariah are adhered to.

If I redeem today, how fast can I get my money?

You can get your funds back into your account within 7 working days from the date the application is received at the fund house.

What is the current value on my Unit Trusts?

A fund’s unit price, Net Asset Value (NAV), is published on the Fund House’s website as well as leading financial newspapers on a daily basis. You may obtain this NAV and multiply it with your number of units to get the current investment value.

Example: NAV is Rs 133.47. Your number of units is 40,000

40,000 * Rs 133.47= Rs 5,338,800/-

What is the Management Fee?

It is the fee charged by asset management companies (AMCs) for managing funds. It is calculated as a percentage of net assets under management and is typically quoted on an annual basis.

What is front-end load?

Front-end load is a commission or sales charge applied at the time of the initial purchase of the investment in a mutual fund. It is deducted from the initial investment amount, and as a result, lowers the size of the investment.

What is back-end load?

A back-end load is a fee that investors pay when selling mutual fund shares. The fee is calculated as a percentage of the value of the shares being sold.

These questions cover both Conventional and Islamic products where applicable.

Fixed Income

What are fixed income instruments?

These are instruments where the issuer (the borrower/customer) issues a security for purchase by the security holder (the lender/financier). These instruments pay investors periodic fixed/floating returns until the maturity date. At maturity, investors are repaid the principal amount (Face Value). These instruments are issued by financial and non-banking financial institutions, corporations and governments.

What are the benefits of investing in fixed income instruments?
  • They provide steady income to investors throughout the life of the instrument.
  • They are rated by credit rating agencies allowing investors to choose instruments as per their respective risk profiles.
What fixed income instruments does Standard Chartered Bank Pakistan Limited (SCBPL) offer to its clients?
  • Retail Term Finance Certificates (TFCs)
  • Treasury Bills (T-Bills)
  • Pakistan Investment Bonds (PIBs)
  • Defence Saving Certificates (DSCs)
  • Special Saving Certificates (SSCs)
  • Certificate of Deposit (CoD)
  • Certificate of Musharika (COM)
  • Ijarah Sukuk
  • Retail Sukuk

You are requested to please check with your respective RM for product availability

Are these securities issued/guaranteed by SCBPL?

SCBPL is only the distributor of these products.

Does SCBPL offer Shariah Compliant Fixed Income Products?

SCBPL offers Shariah Compliant Fixed Income Products. Please contact your RM to check for product availability.

How can Fixed Income Products be Shariah Compliant?

The Islamic Fixed Income Products adhere to Islamic principle of avoiding interest/riba as they are usually based on sale, lease, partnership (Modarba) or agency relationship.

Is the principal guaranteed in fixed income securities?

Fixed Income instruments offer capital protection of Face Value/Principal Amount if held till maturity. If encashed/sold before maturity then the principal/face value is subject to market risk and investment may result in capital gain or a loss.

What are the risks of investing in fixed income investments?

While there are many risks involved, some of the major risks include:

  • Credit Risk/Default Risk (Minimal in Government Securities)
  • Market Risk
  • Liquidity Risk (Low in Government Securities)
  • Reinvestment Risk
  • Legal/Regulatory Risk
Why do government securities have low Credit Risk?

Government securities have low credit risk compared to securities issued by corporations because they are backed by the full faith and credit of the Government of Pakistan.

These questions cover both Conventional and Islamic products where applicable.
SSC/DSC
What are Defence Saving Certificates (DSCs)?

They are government certificates for meeting the financial needs of long term category investors and provide them with the opportunity to take maximum benefit of their savings. These certificates have been specifically designed to meet the future requirements of depositors with a maturity period of 10 years.

What are Special Saving Certificates (SSCs)?

Special Savings Certificates (SSCs) are government certificates that offers a unique investment opportunity for small and medium savers to meet their periodic financial needs.

What is the maturity period of Defence Saving Certificates (DSCs)?

Maturity period of Defence Savings Certificates is 10 years.

What is the maturity period of Special Saving Certificates (SSCs)?

Maturity period of Special Saving Certificates is 10 years.

Can I encash DSCs?

DSCs can be encashed at par any time after the date of purchase. However, no profit is payable if encashment is made before completion of one complete year.

Can I encash SSCs?

SSCs can be encashed at par any time after the date of purchase. However, no profit is payable if encashment is made before completion of six months and no service charges shall be deducted for the encashment of these certificates.

Can DSCs and SSCs be pledged?

DSCs and SSCs can be pledged.

Is amount invested in DSCs and SSCs automatically reinvested at maturity?

Certificates issued/purchased/ reinvested on or after November 15th, 2010 shall not be automatically reinvested (rolled over) on maturity.

Is Zakat applicable on DSCs and SSCs?

Zakat shall be deducted at source as per rules.

Are there any taxes applicable on DSCs and SSCs?

The investment is subject to the deduction of Tax as per prevailing Tax Laws.

Certificate of Deposit/ Certificate of Musharaka
What is Certificate of Deposit?

Certificate of Deposit (COD) is a savings certificate with a fixed maturity date and specified fixed interest rate. A CD restricts access to the funds until the maturity date of the investment for a higher return.

What is Certificate of Musharaka?

Certificate of Musharaka (COM) is a Shariah compliant Certificate of Deposit. It is a profit and loss sharing scheme, with a projected rate of return and maturity period as per chosen tenor.

Is Certificate of Deposit/Musharaka a Bank Savings or a Term Deposit?

COD/COM is not Bank Savings or a Term Deposit.

What are the profit payment frequency options for Certificate of Deposit/Musharaka?

Profit payment frequency can be monthly, quarterly, half yearly, yearly or on maturity as selected on the COM application.

Is there a minimum investment amount for Certificate of Musharaka?

The minimum investment amount is PKR. 100,000/-

What are the charges/fees for investing in Certificate of Musharaka?

Certificate issuer may apply the following:

  • Minimum stamp duty of 0.05% p.a on investment amount at the time of investment.
  • No profit payment on encashment before completion of one month from the date of investment.
  • All premature encashment after one month will incur a downward profit rate adjustment.
  • 1% of the encashment value on redemption of COMs prior to maturity at discretion of the issuer.
Is Zakat and/ or Tax applicable on Certificate of Musharaka?

The payment of profits, encashment value is subject to Zakat deduction (if attested copy of CZ-50 is not provided to ORIXM at any time prior to redemption), Withholding Tax and/or Capital Gain Tax where applicable.

If I redeem today, how fast can I get my money?

You can get your funds back into your account within 7 working days from the submission of attested copy of SNIC/CNIC, request for encashment, along with original certificates (duly discharged) at any SCBPL branch.

These questions cover both Conventional and Islamic products where applicable.
Bonds and Sukuk
What is Face Value/ Par Value?

Par Value is the amount of money a bondholder will get back once a bond matures.

What is a coupon?

The amount the bondholder/sukuk holder will receive as interest payments/ profit payments and is always calculated on Face Value/ Par Value.

What is accrued interest/profit?

This is the holding period profit that accrues to the holder of the security for the time period of holding. In other words, this is the return (interest/profit) that is due to the holder of the security.

What is Yield to Maturity (YTM)?

Yield to Maturity (YTM) - The rate of return that an investor would achieve on a bond/sukuk, if he/she bought it at a given price and held it to maturity; the internal rate of return on investment.

Is there a minimum investment amount for Pakistan Investment Bonds (PIBs), T-Bills and Sukuk?

The minimum investment amount is PKR. 1,000,000/-

What is an IPS Account?

IPS Accounts are custodial accounts maintained for buying and holding Government Securities (PIBs, T-Bills, Sukuk or any other such security issued by State Bank of Pakistan from time to time on behalf of Government of Pakistan). Individuals with a PKR denominated account with SCBPL are eligible to open an IPS account.

Are there any taxes applicable on PIBs, T-Bills and Sukuk?

The investment is subject to the deduction of Withholding Tax as per prevailing Tax Laws.

What are the charges for purchasing fixed income instruments through SCBPL?

Please see the SOCs for latest charges.

These questions cover both Conventional and Islamic products where applicable.
 

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