Understanding Mutual Funds in NEPSE: Are They Worth It in 2025?
Mutual funds in NEPSE offer a low-cost, diversified way to invest in the stock market—but are they delivering value in 2025? This blog explores how mutual funds work in Nepal, their performance, risks, and whether retail investors should consider them this year.
1. Introduction: Why Mutual Funds Are Gaining Attention in Nepal
In a market dominated by direct stock investments, mutual funds have often remained overlooked in Nepal. But with rising awareness, volatility in NEPSE, and new product launches in 2025, more retail investors are asking:
“Are mutual funds actually worth it?”
This blog answers that question—by exploring how mutual funds work, what types are available in NEPSE, and how they have performed over time.
2. What is a Mutual Fund?
A mutual fund is a pool of money collected from multiple investors, which is then professionally managed and invested into a mix of:
Stocks (equities)
Bonds or debentures
Bank deposits
Other instruments
The goal is to generate returns while reducing individual stock risk through diversification.
3. Types of Mutual Funds in Nepal
In NEPSE, mutual funds are classified into two major categories:
a) Closed-Ended Mutual Funds
Listed on NEPSE like regular stocks
Fixed maturity (usually 5–10 years)
Traded at market price (which may be above or below NAV)
Examples:
NIBSF1 (NIBL Samriddhi Fund 1)
NMB50, NICBF
NESDO Samunnat Fund
b) Open-Ended Mutual Funds
Units can be bought/sold directly from the fund anytime
Always valued at NAV (Net Asset Value)
Not traded on NEPSE
Examples:
Nabil Balanced Fund III (NI 31)
NIC Asia Equity Linked Investment Scheme
Siddhartha Systematic Investment Fund
4. NAV vs Market Price: What’s the Difference?
Term | Meaning |
|---|---|
NAV | The real per-unit value of the fund based on its assets and liabilities |
Market Price | The price you pay if buying from the stock exchange (for closed-ended funds) |
Many closed-ended funds in NEPSE trade at a discount to NAV. For example:
NAV = Rs. 11
Market Price = Rs. 9
Discount = ~18%
✅ Smart investors sometimes buy funds at a discount to NAV to maximize returns.
5. Performance of Mutual Funds in NEPSE (2019–2025)
Fund | Inception | NAV (Start) | NAV (2025) | CAGR* |
|---|---|---|---|---|
NIBSF1 | 2019 | Rs. 10 | Rs. 15.20 | ~8.7% |
NMB50 | 2020 | Rs. 10 | Rs. 13.80 | ~7.1% |
NICBF | 2020 | Rs. 10 | Rs. 12.60 | ~5.8% |
Siddhartha Fund | 2021 | Rs. 10 | Rs. 14.40 | ~9.6% |
*CAGR = Compounded Annual Growth Rate (approx.)
📊 Observation:
Mutual funds outperformed bank savings interest rates
Lower volatility than direct NEPSE stocks
Most investors ignored them during bull runs, but they protected downside in bear markets
6. Advantages of Investing in Mutual Funds
✅ Diversification
You don’t have to pick winning stocks—fund managers do that for you.
✅ Professional Management
Managed by licensed fund managers (e.g., NIBL Ace, Nabil Investment, NIC Asia Capital)
✅ Low Cost
Entry possible with as low as Rs. 100 or Rs. 1,000
✅ Passive Returns
Ideal for salaried individuals or those new to the stock market
✅ Dividend Income
Funds distribute periodic returns via cash dividends or bonus units
7. Disadvantages / Risks
⚠️ Low Liquidity (for closed-ended funds)
Hard to exit instantly if trading volume is low
⚠️ Discounted Market Price
Even when NAV increases, prices may not reflect it
⚠️ No Guarantee
Returns depend on market performance
⚠️ Fund Manager Risk
Poor asset allocation can underperform index
8. Mutual Fund vs Stock Investment in NEPSE
Feature | Mutual Funds | Direct Stocks |
|---|---|---|
Risk | Lower | Higher |
Return Potential | Moderate | High (if selected right) |
Management | Passive | Active |
Entry Knowledge | Low | Medium to High |
Time Commitment | Minimal | Daily monitoring |
Diversification | High | Depends on you |
✅ Who Should Choose Mutual Funds?
Beginners in NEPSE
Salaried professionals
Investors who want low-maintenance exposure
9. How to Invest in NEPSE Mutual Funds
a) For Closed-Ended Funds:
Buy/sell via NEPSE broker platform
Same process as buying regular shares
b) For Open-Ended Funds:
Apply through the AMC website or app (e.g., Nabil Invest, NIC Asia Capital)
You can buy or redeem units anytime at NAV
10. Top Mutual Funds to Watch in 2025
Fund | Category | Why It’s Promising |
|---|---|---|
NI 31 | Open-Ended | New balanced fund with strong manager |
NMB50 | Closed-Ended | Index-linked performance |
NICBF | Closed-Ended | Sectoral diversification |
NESDO Fund | Closed-Ended | Backed by social lending and capital |
11. Tips for Mutual Fund Investors in Nepal
🔔 Track NAV regularly (Check in Merolagani, NIMB Capital, or Nepalytix)
📅 Set a monthly SIP (Systematic Investment Plan) for long-term wealth building
📈 Compare Fund Performance using 1-year, 3-year, and 5-year NAV growth
🧠 Don’t judge only by price—always check NAV discount or premium
📉 Use during market correction: Mutual funds hold up better when NEPSE crashes
12. Nepalytix Edge: Mutual Fund Analytics at Your Fingertips
With Nepalytix, you can:
Track NAV vs Market Price gap
Compare fund manager performance
Set alerts for dividend payouts
Build a hybrid portfolio of mutual funds + stocks
Forecast fund value using sector rotation models
13. Are Mutual Funds Worth It in 2025? Final Verdict
✅ Yes—for those seeking:
Stability
Diversification
Passive returns
Long-term growth
❌ No—for:
High-frequency traders
Investors seeking aggressive short-term returns
Those who ignore NAV and only chase price
📊 Mutual funds are worth considering in 2025—especially when NEPSE is volatile or uncertain.
Conclusion: Smart Investing Starts with Simplicity
Mutual funds in NEPSE are no longer the “ignored stepchild” of the market. They offer:
Diversified exposure
Managed risk
Peace of mind for everyday investors
As awareness grows and more open-ended options launch, mutual funds may finally take their place in the spotlight of Nepal’s financial system.