Investing in investment funds. For many savers, this still sounds exotic, only something for speculators. But that is the fund investment withnichten.
The most important facts about funds at a glance:
1. What is a fund?
An investment fund collects money from investors. This capital is then invested by the fund manager on the financial markets for the investors. The great advantage of a fund is the spreading of risk. It invests not only in one stock (equity fund) or in one bond (bond fund), i.e. what investors should avoid at all costs, but in many. With an equity fund, investors can benefit from increases in the value of shares and dividend payments.
There are funds for every type of investor, from the extremely risk-averse to the risk-averse.
2. How to invest safely? Could a fund be the solution?
Investing money involves risk in the vast majority of cases. Ultimately, this also applies to the savings book. Rule of thumb: the higher the risk, the higher the interest rate. The risk can be mitigated by investing in multiple stocks, for example. The principle: losses from one investment can be offset by gains from another. A fund that invests in a variety of investments can thus help to invest more securely.
3. What if the fund company goes bankrupt? Is then the savings gone?
The money that investors invest in a fund is known as special assets. In case of bankruptcy of the fund company it is protected.
4. What does a fund cost?
There is nothing for free, not even with the fund investment. The service that fund companies offer has its price. There is a one-time sales charge for distribution, sometimes a redemption fee and the cost of management. Sounds dramatic, but it’s not. There are often discounts on the initial sales charge. Redemption fees are very rare. Management fees are incurred annually for the management of the fund.
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5. What is fund savings??
In principle, fund savings are no different from normal savings. In this case, the savings amount is invested in an investment fund – and not in a savings account. Step by step, the saver invests in the stock market, for example.
The advantage: the saver invests in a disciplined manner, i.e. always and not just when everyone is buying and prices are particularly high. Over the years, regular purchases usually result in an attractive average price, which can lead to a higher final yield.
6. How do shares work? Is this something a fund investor needs to know?
A fund investor does not need to know the details of how a share works. He should know that there are shares and that they offer interesting yield opportunities in the long run. The rest – selecting, buying, monitoring, selling – is done by the fund manager.
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7. How best to invest money? Is a mixed fund the solution?
Mixed funds, which may invest in stocks, bonds, currencies, commodities and also real estate (simultaneously), are a very flexible investment product. The investor receives an all-round service and is invested with his savings in a wide variety of markets. This ensures a broad spread of risk and the opportunity to participate in the investment opportunities of different markets.
8. Real estate as a component of retirement provision. Yes, but how?
Real estates can be a very meaningful component for the age precaution. However, a purchase, especially of a commercial property, often exceeds the financial means of a private investor.
The solution could be a real estate fund. This fund invests primarily in commercial real estate (less frequently in residential real estate). In this way, private investors can profit from the performance and rental income of the properties in proportion to their share in the fund.
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9. How do ETFs work and how do they differ from active funds??
An Exchange Traded Fund, or ETF, is an exchange-traded index fund. In this type of fund, the fund manager simply replicates an index, for example the German benchmark index Dax, one to one. The fund will perform plus-minus the same as the Dax. The simplicity of the design makes ETFs very cost effective. But an ETF can never (significantly) outperform its underlying index in the long run. In contrast, the fund manager of an active fund analyzes the markets and looks for the best opportunities and can buy or sell accordingly. If the investor expects the share price to fall, he could, for example, increase the cash balance (cash ratio) in the fund.
10. Is a fund unit something like a share?
A fund share is the smallest part of the fund or the smallest unit of the fund’s assets. The investor buys shares in the fund. According to these proportions, the investor participates in the performance of the fund. In this respect a fund share is comparable to a share. Difference: with a fund share, he has a stake in a number of stocks, not a single one.
11. In what should I invest? A question that fund investors also ask themselves.
Unfortunately, fund investors also have to ask themselves this question. At the very least, investors should have a rough idea of whether they want to invest in stocks (riskier, but also more risky) or bonds (more conservative) or, for example, high-dividend stocks (special), real estate (more long-term) or commodities (very risky). In general, it is not an either-or decision anyway, but rather both and. In a balanced portfolio, stocks, bonds, real estate and even commodities have their place. The weighting then depends on personal risk appetite. If you want to make things easy for yourself, you can invest in a mixed fund whose weightings are most in line with your wishes.