Imagine you have a craving for Party Jollof Rice, you check your calendar and your next owanbe is three months away. You can’t wait for three months to satisfy your Party Jollof craving. If you decide to prepare the party Jollof on your own, it would cost you more in time and resources.
Moreover, getting and cooking with firewood (the secret ingredient of real Party Jollof) might be difficult. You need to come up with a plan.
You call your friends who are Party Jollof lovers like yourself and they agree to put money together to prepare tantalizing firewood cooked Party Jollof.
The parties to a Mutual Fund?
The money pooled together is given to a third party (The Custodian). You also get a Cook (Fund Manager) who is a professional at preparing Party Jollof. The Cook gets all the ingredients and resources (including firewood and the big shiny pot) and begins cooking.
There is someone appointed (The Trustee) to monitor the Cook and the Custodian to make sure they give you and your friends the best Party Jollof.
Party Jollof is Ready
Once the Jollof Rice is ready, the Cook serves (dividend payment) to everyone who contributed in proportion to their initial contribution.
If you do not feel like eating yet, you can ask the Cook to add your serving to the your next serving (dividend re-investment). Dividend reinvestment helps you enjoy the benefits of compound interest.
Bringing it all together
The same way you and your friends pooled money to have Party Jollof, is the exact way money from different investors is pooled together, managed and invested in different asset classes by a Fund Manager.
The Fund manager shares the returns (dividend) amongst participants at predefined intervals. You can re-invest your dividend to enjoy compound interest. This is why it’s called a ‘Mutual’ Fund.
There are different types of Mutual Funds suitable for different investment objectives. We will shed light on this in our next post.
Get your share of the Party Jollof!
Mutual Funds are simple and convenient investment options.
Call 07002673767 or send an email to [email protected] to start.