An expertly managed investment fund is a type of alternative investment. The money it receives from investors forms an investment portfolio composed of different securities (bonds, shares, etc.) to generate attractive returns based on its horizon and objectives.
What should I consider before investing in funds?
To start your journey, you must be very clear about where you want to go, and that is why it is important to define:
1. Goals
What do we want to achieve? I want to invest for my retirement, my children’s university, or to buy a house. The answer to this question will help us to define in concrete and quantifiable terms the objectives we are looking for and, with them, which funds are the most appropriate.
2. Investment horizon
How soon do I want to reach my goals? There are funds for very short-term needs and productively managing my day-to-day resources, as well as for the long term, for example, buying a house in 5 years. Aligning the term of my objectives with the investment horizon suggested in investment funds is essential to moving forward on the right path.
3. Risk tolerance
Find out what kind of investor you are. Determine how comfortable you feel with the risk; remember that the higher the risk, the more likely there is to be higher performance. Understanding your risk tolerance will help you select funds that fit your profile.
What are some of the risks associated with investment funds?
There are a couple of potential risks associated with investment funds:
1. Potential for loss of capital
Portfolio managers cannot guarantee the fund’s return, so there is always a potential for loss of investment capital.
2. The diluting effect of diversification
Sometimes, the diversification of a fund can have a diluting effect on positive returns. A fund’s profitability may not increase if a share doubles in price.
Myths about investment funds
There are 5 common mistakes when thinking about investment funds:Investing in investment fund, What and how is it ?
1. Investors own the fund’s underlying investments.
The biggest misunderstanding about investing in investment funds is that investors own the fund’s shares. This is not the case; investors own the shares of the fund itself, not the underlying investments in it.
2. Investment funds are only made up of shares.
Another common myth is that investment funds are composed only of shares. In fact, investment funds can invest in various asset classes, including, among others, fixed income, cash, and non-traditional income vehicles, such as alternative ones.
3. I need large sums of money.
One of the barriers to starting to invest is the belief that large amounts of money are required. Investing in funds is accessible, and you can do it with very low amounts.
4. I have to be an investment expert.
When you invest in funds, a team of professionals with the extensive market knowledge and a broad perspective manages your money, simplifying the investment process. Your money will work for you.
5. It’s the same as investing in stocks on the stock market.
Investment funds can be invested in different instruments. There are different investment funds available for both debt and equities.
Types of investment funds
As one of the leaders in the world of investment funds, BlackRock offers a wide variety to help you achieve your investment goals. Our selection includes:
- Fixed-income funds invest in bonds or other fixed-income instruments, and it is understood that they usually have less risk than stocks or equities.
- Equity funds invest in the stock market so that their investment grows over time.
- Multi-asset funds invest in multiple asset classes and dynamically adjust investments for returns.
In vesting in investment fund, What and how is it ?
Growth-oriented investment funds try to manage risk and navigate different market conditions, and asset allocation funds help maintain a balanced portfolio.Investing in investment fund, What and how is it ?
