What is a mutual fund?
A mutual fund is a big pot made up of many people’s money. A professional firm invests that pot on everyone’s behalf in shares, bonds and other assets. You buy units in the fund, which means you own a small slice of the whole pot.
You do not have to pick shares yourself, and even a small amount ends up spread across many holdings. But if what the fund owns falls in value, so do your units: gains and losses are both shared by everyone.
Say Shirin, Zubair and thousands of others together put Tk 100 crore into a fund, with Tk 10,000 of it from Shirin. The fund manager spreads the money across shares in 50 companies and some bonds. If the whole pot rises 10% in value, Shirin’s part is worth about Tk 11,000; if it falls 10%, about Tk 9,000.
How it works
A mutual fund is run by an asset management company licensed by BSEC, which decides which shares or bonds to buy. A separate custodian holds the fund’s money and assets, and a trustee oversees the fund on investors’ behalf. BSEC sets the rules.
Take the market value of everything the fund owns, subtract what it owes, and divide by the number of units: that is the NAV (net asset value), what each unit is really worth. When the fund’s holdings rise, the NAV rises; when they fall, it falls. A fund may also pay dividends, but it does not have to.
Bangladesh has two kinds of fund. With an open-end fund you buy units directly from the asset manager or its selling agents at a price close to NAV, and sell them back to the manager. Units of a closed-end fund trade on the stock exchange like shares, so their price can differ from the NAV.
If an open-end fund’s NAV is Tk 10 a unit, Tk 50,000 buys about 5,000 units. If the NAV is Tk 11 a year later, your units are worth Tk 55,000; at Tk 9, Tk 45,000. The fund’s yearly costs are taken out of its assets and are already reflected in the NAV. The figures are only examples.
Open-end and closed-end
- Open-end funds
- No fixed end date; you can buy and redeem at NAV-based prices at any time. A small difference (a load) may apply when buying or selling.
- Closed-end funds
- A fixed number of units and a fixed life; traded on the stock exchange through a BO account.
- Shariah-based funds
- Invest only in Shariah-compliant companies and assets.
- Fixed-income funds
- Put most of the money in bonds and term deposits; usually less volatile than share-based funds, but not risk-free.
- SIP (monthly instalments)
- Buying units with a fixed sum every month. Many managers let you start a SIP with a small amount. When the price is low you get more units, and fewer when it is high.
Why closed-end funds trade below NAV
For years most closed-end funds in Bangladesh have traded well below their NAV. In November 2025, 34 of 37 listed funds were below NAV, at discounts of roughly 21% to 72%. In other words, units worth Tk 10 by NAV were selling for Tk 3–8 on the market.
Reasons usually given are weak performance, low trust in management and a history of fund lives being extended. There is no promise the discount will close: buying at a discount, it can still widen. In May 2026 BSEC ruled that closed-end funds at a discount of 25% or more to NAV must convert to open-end or be wound up; the matter has also gone to court, so the final outcome will become clear over time.
What return to expect
Mutual funds pay no set return; results depend on what the fund holds and how well its manager decides. In 2025, when the DSEX fell about 7%, some funds gained around 20% while others lost as much as 30%.
So the label “mutual fund” does not itself mean safe or risky; what matters is what the fund buys. Share-based funds move much like the stock market; fixed-income funds usually move less. A fund’s past results do not promise future ones.
Why people choose it
- A small sum is spread across many companies and assets.
- A professional manager does the picking and monitoring.
- A SIP lets you invest a little every month.
- Open-end funds can usually be cashed in within a few days.
- NAVs are published regularly, so you can see what your holding is worth.
Points to weigh
- Neither your money nor any return is guaranteed.
- Management and other fees come out of the fund every year, gain or no gain.
- Closed-end funds can trade far below their NAV.
- Results depend heavily on the manager’s skill.
Tax
Dividends from a fund are part of your income, and tax may be deducted at source. There used to be a tax-free allowance for mutual fund income up to a set amount; the Income Tax Act 2023 and later Finance Acts have changed these rules and may change them again, so check the rules for the year you invest.
Investing in mutual funds can count towards the investment tax rebate. There used to be a separate Tk 5 lakh cap on rebate-eligible fund investment; the Finance Act for 2026–27 removed it. The overall rebate limit is still set in the Finance Act.
Gains from selling closed-end fund units on the exchange follow the capital-gains rules for listed securities.
Tax rules can change with each year’s Finance Act. Before a big decision, check the latest rules or speak to a tax adviser.
How to get started
- Decide on the type of fund: share-based, fixed-income or Shariah-based.
- Read the fund’s prospectus and latest report: what it invests in, what it costs and how it has done.
- For an open-end fund, apply to the asset manager or its selling agent; you need your national ID, photographs, bank account and nominee’s details.
- For a closed-end fund, buy through a BO account and broker, like a share.
- Keep your unit certificate or statement, and check the NAV from time to time.
Check before you start
- Do I know what the fund actually buys?
- What does it cost a year, and is there a load when I buy or sell?
- Have I looked at several years of results, not just one good year?
- For a closed-end fund, do I understand the gap between price and NAV?
- Can I leave this money for several years even if the value falls?
- Have I checked that the asset manager is registered with BSEC?