An investment fund is a savings instrument.
Investment funds are savings instruments . It is a heritage that is formed with the contributions of a group of people who invest their capital in search of profitability. What the fund does is gather the money contributed by all the participants, so that an entity is responsible for its management and administration .
The funds usually diversify investments , so that they are allocated to monetary assets, stocks, bonds and other financial instruments. In this way, the capital of the participants is more protected.
Operation of an investment fund
The operation of an investment fund can be understood as follows. Each person's savings are allocated to the fund, creating a large common heritage . Given the size of this asset, savers achieve negotiating power that would be impossible to obtain if each individual invested on their own.
Specialists recognize several advantages of investment funds. They generally do not require large amounts of money to enter. On the other hand, they are well regulated and their subscriptions are easy to buy and sell. Finally, investment funds are professionally managed, which is an advantage for savers who do not have great knowledge of finances .
Regarding the history of the funds, their most distant origin dates back to the 17th century , with the administratie kantooren in Holland . Of course, these mechanisms were very different from the current ones. It was not until 1957 that the first investment fund as we know it today appeared.
An investment fund can operate in bonds, stocks, monetary assets and other financial instruments.
Classification according to type
There are various types of investment funds, which respond to the regulations in force in the legislature of each country.
The Free Investment Fund (FIL) and the Free Investment Fund Fund (FFIL) are known as the Spanish version of Hedge Funds and can be clearly differentiated from the rest of the more traditional funds because they provide greater flexibility to clients, especially Regarding indebtedness, periodicity in the calculation of the liquidation value and commissions . The latter, in addition, are funds in which the assets of other free investment funds are invested.
The Real Estate Investment Fund (FII) is characterized by being prepared to receive investments in different properties, from homes and garages to industrial structures, from which a return is obtained by renting or reselling them.
There is also a type of foreign funds known as Variable Capital Investment Company (SICAV), in which investments can be made in shares valued in another currency than the national currency. It works in a similar way to traditional investment funds and has taxation similar to theirs.
The investment fund portfolio
It is necessary to clarify that when purchasing an investment fund you are purchasing a minimum part of a portfolio , that is, participating in a common fund in which said subject has a net asset value , which is proportional to the money invested in it. himself.
How it works is like this. The managing entity of said fund receives money from investors and invests it in shares that it considers profitable (respecting, of course, the wishes of each investor); The total investments received will consist of the total value of the assets .
For example, if an individual invests 1,000 euros in a European fund whose assets reach 10,000,000 euros, divided into shares of various companies such as Royal Dutch (10%), Société Générale (8%) and Telefónica (5%), said Investment will be divided among them in proportion to what they own. In this way the investor will have in shares : 100 euros in Royal Dutch, 80 euros in Société Générale and 50 euros in Telefónica.