Are you thinking of investing? If so, surely you have heard of investment funds as a potentially profitable alternative to grow your money. Today we tell you what an investment fund is and its characteristics.
Investment fund: What is it and how does it work?
Financial exploitation attorney defines it as a type of collective investment where several investors or participants entrust their money to financial professionals, to generate a potentially higher return than what they would obtain by investing each one on their own.
To explain its operation simply, here is the practical example:
- Imagine that inside a basket there are financial assets such as bonds, shares and more, placed there by a financial institution.
- You and more people decide to invest in the said basket, which will be managed by experts in search of generating future profitability for you.
- When said profitability is obtained, each participant would obtain a part in proportion to their investments.
The same source highlights that these funds can be classified into time horizons, each with different objectives:
- Short term (6 months): It presents a lower level of risk than the rest and could be used to cover unforeseen events.
- Medium-term (1 year): It could help you achieve goals like a trip or a car.
- Long term (several years): I would be focused on more ambitious projects such as obtaining a home or educating your children.
Advantages of investment funds
As Economipedia indicates, the pros are as follows:
- Access to almost any market, which is not normally available to those who invest individually.
- There are various types of investment funds, such as fixed income, variable income, mixed, among others. Here we leave you information about fixed income and variable income.
- You do not need to be an investment expert, since the management of these funds is already carried out by specialists in the field, who must follow careful regulations to guarantee their efficiency and transparency.
What to consider
If you want to invest in these funds, you need to consider the following:
There are commissions involved
The specialized administration of these investments is recognized through a commission, which may vary according to the managing entity.
Be aware of the risk
Here NYC fraud lawyer recommends that do not forget that in every investment the risk/return binomial is present. A greater possibility of profitability implies assuming a higher risk, for this reason, you must know your profile as an investor.
Share your financial goals
- Many people prefer not to tell their family, co-workers or friends about their goals because they are ashamed to find out if they don’t meet them.
- However, according to a study by the Dominican University of California, those who write down their goals and share their weekly progress with their acquaintances are 33% more likely to achieve their goals
If you are married or live together, work with your partner for a healthy financial relationship
- Juan Camilo González, Director of Financial Planning & Founder, advises that you put together a “set of beliefs” with your partner that allows them to work on their finances following common goals.
- Along the same lines, Gonzales mentions the importance of a “financial appointment”, where both discuss family expenses with a positive attitude that facilitates decision-making.