World of investment funds
What are investment funds?
Investment funds collect money from numerous investors which is then invested into a variety of financial instruments. An investment fund may be compared to a large vessel which contains various securities (stocks, bonds, money deposits). By buying a share or unit in an investment fund, the investor immediately becomes the owner of all the securities held by the fund.
Each investment in an investment fund is subject to a certain risk. The riskier the fund the greater the possibility of earning a return, and the longer the investment horizon.
That is precisely why it is wiser to entrust one's money to experts, institutional investors which will use risk dispersion or investment diversification to reduce that risk.
Main types of investment funds
-
Money market funds
- invest predominantly in short-term, low-risk money market instruments, including deposits, treasury bills and other short-term securities
- intended for all of you who would like to invest in low-risk financial instruments
- designed as an instrument to maintain the value of the money invested but also for the purpose of earning a return in accordance with a low risk assumed
- suitable for the investors who need access to their money in the near future
- used for managing short-term excess liquidity and as a short-term investment of the money which serves to finance emergencies
- record stable and continued unit value growth
-
Bond funds
- invest predominantly in bonds
- intended for all of you who seek a potentially higher return than that earned by money market funds and are prepared to accept minor oscillations in fund unit value
- suited to short-term, medium-term and long-term goals
- intended to diversify the risk of investing in stocks and equity funds
-
Balanced funds
- invest in various asset classes, predominantly bonds and stocks
- intended for all of you who are prepared to accept greater oscillations in fund unit value at a potentially higher return
- usually earn a higher return than bond funds, and have lower oscillations in fund unit value than equity funds
- their advantage lies in the fact that they enable asset allocation into both bonds and stocks through a single vehicle or product
- thanks to the possibility of exposure to different asset classes, they are flexible in reactions to market changes
- intended for all of you who would seek a higher return through exposure to equities but also the stability provided by bonds
-
Equity funds
- invest predominantly in stocks
- intended for all of you who are prepared to accept a high risk at a potentially high return
- more suitable for long-term goals where earning a high return is crucial
- unit prices usually have greater oscillations than, for instance, bond funds
- investor gains through an increase in the value of stocks held by the fund
