Why is it worth investing in investment funds?

Investing in investment funds

There are many benefits from investing in investment funds due to the numerous advantages of such a form of investment. Investing in funds ensures the security of the funds entrusted, the return on investments, professional management, relative increase of profitability and lower costs and dispersion of investment risk in comparison with individual investments on the stock exchange.

Investment funds generate relatively high income compared to traditional forms of investment, in particular bank deposits. A further decline in interest rates on bank deposits causes that an increasing number of people are transferring their savings to funds. In this respect, there is a significant increase in the popularity of saving funds.

Advantages invested in investment funds

In comparison to traditional forms of saving, the funds have a number of advantages:

An investment fund is the best form of investing financial surplus for people who do not have time to individually search for the most advantageous investments, or are not experts on the capital market.

We do not have to be investment specialists, it is enough to define our ability to take risks. Investing in investment funds does not require a great deal of knowledge about capital markets. Regardless of which fund we choose, we will always have guaranteed professional management of our resources through the services of experienced specialists.

Investing through an investment fund involves lower operating costs on the capital market in relation to those that we would invest on our own. The costs of functioning of the fund are covered by many participants.

Usually small investors do not have sufficient funds to ensure the profitability of investments at a given level of costs in the market. As a large investor, the fund has an influence on the level of costs of its functioning on the market, which allows for negotiating the terms of purchase of individual financial instruments (i. e. buying them at a lower price than in the case of investing by particular participants separately), which translates into higher profitability of the investment.

Due to the amount of capital accumulated in the fund, the fund has the right to participate in capital operations available only to major investors or institutional investors. Therefore, it may be possible to take part in the pedestrian market operations, participate in tenders for treasury bills and bonds, purchase large blocks of shares on the primary market.

The funds gathered by the fund allow for the acquisition of a larger number of different financial instruments (diversification of the portfolio), thanks to which the fund disperses the risk more effectively than individual investors. This reduces the burden of the investment portfolio’s exposure to individual risk associated with particular instruments.

The funds are characterized by flexibility of offers – we have the possibility to choose a fund characterized by the principles of portfolio diversification, investment strategy, risk level and profitability, corresponding to our individual preferences. Funds are also an effective way of constructing a flexible, tailored to individual needs and modern strategy for building long-term investment plans. The possibility of correcting goals and principles of saving is an additional, significant advantage of the funds.

We do not need to have a sufficiently large capital to become a contributor to the fund. In many funds, the minimum contribution per share is set at a level that is acceptable even to inadvertent investors, which makes it possible to invest relatively small amounts. Self-investing in land and land by such people would be virtually impossible due to the level of investment costs.

Most funds allow even small amounts to be invested. The minimum first instalment is usually 100 USD advance, while the next installments may be even lower. This results in a high availability of participation units for individual investors. With such small funds designated for investing, one cannot in principle think about investing independently, e. g. by investing in a single investment, e. g. by investing in a single currency. On account of relatively high prices of shares and brokerage commissions.

We can choose a convenient moment for us to start the investment and purchase participation units in an open-end fund (in a closed-end fund, subscriptions can be made only within the subscription period), which means quick access to investment opportunities.

The exit from the investment in participation units also depends on an individual decision, since an open-ended investment fund has the obligation to buy back participation units for each participant. This means that we can take out the redemption of units by the fund at any time convenient to us (for comparison, in the case of bank deposits, the termination of a contract before the expiry of the term usually results in the loss of interest).

Funds also offer the possibility of converting, i. e. freely transferring the invested funds between the funds within a single fund family, which makes it possible to react constantly to the changing situation on the capital market.

The fund is also a form of investment which, in every aspect of the fund’s security is to multiply money. As the fund is a public trust institution, its investment activities are subject to a number of regulatory restrictions in order to prevent the investment portfolio managers of the excessive risk fund.

Moreover, investment fund companies do not have direct access to funds invested in the funds they manage. The fund is a distinct mass in relation to the company.

Eliminating the risk of bankruptcy of an investment fund will significantly increase the security of the funds entrusted, but it will not protect us completely from the investment risk related to the nature of the fund’s deposits.

The participation unit may be the subject of a pledge used as collateral for designated receivables.

Investment funds provide additional services to participants. To meet the expectations of the company’s customers, they offer many additional facilities, including:

frequency in various types of systematic savings programmes, which are rewarded with lower bonuses (if we are dependent on long-term systematic savings)

keeping of individual pension and occupational pension accounts as a form of pension protection

making payments in foreign currencies

opening several accounts (known as registers) for one person and common registers of married

offering additional cash benefits by the company to participants who declare significant contributions to the fund

establishing a record (disposition in case of death of a participant) of funds held by the participant in the register for the benefit of another person or group of persons.

Fund portfolio:
http://effectivinvestingmoney.blogspot.com/2017/10/fund-portfolio.html

Reklamy