Mutual funds and unit trusts in Ghana: a beginner's guide
Mutual funds and unit trusts let you invest in Treasury bills, bonds and shares with small amounts. How Ghanaian funds work and what to compare.
Mutual funds and unit trusts pool money from many investors and invest it on their behalf in assets such as Treasury bills, bonds, fixed deposits and shares. They give ordinary savers access to professional management and a spread of investments with small amounts. In Ghana, they are licensed and supervised by the Securities and Exchange Commission (SEC). This beginner's guide explains how mutual funds and unit trusts in Ghana work, the types of fund, how to check safety and what to compare before investing.
Mutual fund or unit trust?
The difference is mainly legal. A mutual fund is set up as a company in which investors buy shares, while a unit trust is set up as a trust in which investors buy units. For most investors they work in much the same way: your money is pooled, invested, and the value of your shares or units rises or falls with the investments.
How you earn money
Your return comes from the interest, dividends and price changes of the fund's investments, minus the manager's fees. The value of each share or unit is calculated regularly, often daily. When you invest, you buy at the current price; when you withdraw, you sell at the price on that day. If the price has risen, you make a gain.
For example, if you buy units at GH₵1.00 each and the price rises to GH₵1.15 a year later, your investment has grown by 15%. If the price falls, your investment loses value, which is why it matters what the fund holds.
Types of fund
A money market fund invests in short-term, low-risk assets and suits short-term savings and emergency funds. A fixed income fund invests in longer-term bonds and can pay more, but its value can fall when interest rates rise. A balanced fund mixes bonds and shares, and an equity fund invests mainly in shares for long-term growth with more ups and downs. Some funds invest in dollar assets.
Ghana's domestic debt exchange in 2023 was a reminder that even government securities carry risk, and that funds holding long-term bonds can lose value. Understanding what your fund holds matters.
Checking safety
Before investing, confirm that the fund and its manager are licensed by the SEC. A licensed fund's assets are held by an independent custodian, separate from the manager, which protects investors. Read the fund's prospectus or fact sheet to see what it invests in, its fees and how withdrawals work. Avoid anyone offering guaranteed high returns, which licensed funds cannot promise.
What to compare between funds
Look at the fund's returns over several years rather than the most recent month, and compare them with Treasury bill rates. Check the management fee and any entry or exit charges, the minimum investment, how quickly withdrawals are paid, and whether you can top up by mobile money. Our money market fund calculator shows how a yield grows over time, and our guide to buying Treasury bills in Ghana covers investing directly.
Matching a fund to your goal
Use a money market fund for money you might need within a year. Consider a fixed income or balanced fund for goals a few years away, such as a car or school fees. Reserve equity funds for goals five or more years away, such as retirement, where you have time to ride out falls. Regular monthly contributions, even small ones, build a habit and smooth out price swings.
Mutual funds alongside other savings
Funds work well alongside your pension, including voluntary Tier 3 contributions that cut your tax; see Ghana's three-tier pension scheme. If you already save with a susu collector, moving part of your savings into a fund can earn a return; see our guide to susu savings in Ghana.
Frequently asked questions
Who regulates mutual funds in Ghana?
The Securities and Exchange Commission licenses and supervises mutual funds and unit trusts.
Can I lose money in a mutual fund?
Yes. Fund values can fall, especially funds holding long-term bonds or shares.
What is the safest type of fund?
Money market funds, which hold short-term, low-risk assets, are generally the least volatile.
Sources
This article is general information, not financial advice.