An investment fund is a financial vehicle that groups together the capital contributions of different investors, this figure is known as participants. Its management, carried out by professionals and financial advisors, seeks to obtain returns and diversify investments in order to generate profits without taking great risks.
Main characteristics of investment funds
– Management is carried out through the Council of financial advisors, through analysis, decision making and market strategies.
– By investing in a wide variety of assets, risk is diversified and you do not expose fund participants to the volatility of a single product.
– It also allows investors to recover the amounts invested in reasonable periods depending on the type of fund.
– Another of the great advantages of participating in a fund is transparency. The financial advisors They periodically offer reports on the evolution of the fund, the investments made or the commissions.
How does a fund work?
Broadly speaking, the operation of an investment fund is simple. Investors make contributions and therefore acquire shares that represent a proportional part of the fund.
Depending on the type of fund, the management company invests based on its strategy in different assets such as stocks, real estate, bonds, etc. All of this is based on an investment policy that has previously been established by the creator of the fund.
The fund has units and its value is calculated by dividing the fund’s assets by the number of units in circulation. This is called net asset value and is updated periodically based on the evolution of the fund’s investments.
And finally, on a periodically established basis, the profits and losses are distributed among the participants according to the number of shares they own.
What are the most profitable funds?
There are different types of investment funds. Those with fixed income or variable income.
The former invest in debt, by governments or corporations, and offer moderate profitability and risk.
The latter focus on purchasing shares which can provide more profits but at the same time implies greater risk. Between both types of funds there is a middle path, mixed funds, which combine a balance between one and the other.
There are also guaranteed funds, a vehicle that ensures the total or partial recovery of the capital invested at a future date regardless of the evolution of the markets.
And finally free investment funds or hedge funds, which due to much more complex strategies can take greater risks and therefore obtain better returns.
In any case, investing in a fund can provide some advantages such as access to investment for small and medium-sized investors, better investment conditions since by grouping the capital into multiple participants, better conditions can be negotiated.
And although it may seem easy, it is always important to surround yourself with good professionals. The figure of a financial advisor when choosing the fund to invest in is a guarantee and support during the financial journey of our investments.