If in a foreign country, investment fund is a popular and popular form, in Philippines, it is quite “quiet”.
To help you have a clearer view of this profitable investment. Let’s find out the basics with Fastloans.PH in the following article.
Table of Contents
- 1 What is an investment fund?
- 2 Why should you choose to invest in investment funds?
- 3 Classification of investment funds
- 4 Who should join investment fund?
- 5 Criteria for knowing a reliable investment fund
- 6 Summary
What is an investment fund?
An investment fund is a non-bank financial intermediary that attracts idle money from a variety of sources to invest in stocks, bonds, currency, or other assets. All these investments are professionally managed, closely by the fund management company, custodian bank and other authorities.
Investors often have confusion between investment funds and investment fund management companies. In terms of functions, the fund management company is the unit that manages investment funds, and investment funds can be viewed as products and services that the fund management company provides to investors.
A investment fund is established to call for capital mobilization or to attract capital from many different sources. Invest in a number of assets that comply with investment goals, such as:
- Mineral stocks
- Real estate
The Fund will be managed by a team of experienced professionals and supervised by the competent authorities to ensure the interests of investors.
Why should you choose to invest in investment funds?
Investing is never easy. Because it requires you to have a lot of experience, knowledge of the market and time. Therefore, many people choose to invest through Investment funds for the following reasons:
- Minimize risks thanks to diversifying investment.
- Cost savings but still bring profit. This is by investing in assets with the long-term growth potential.
- The investment money is managed professionally by a team of leading experts.
- Closely supervised by the authorities to ensure the interests of the participants.
- The dynamics of the investment fund in terms of strategy and asset portfolio.
- Opportunities to participate in investments in products such as bonds, stocks, and portfolio swap funds.
Classification of investment funds
Based on the classification criteria, investment funds can be divided into the following six categories:
Based on mobilized capital
Collective investment fund (Public fund): To be able to raise capital, investors will widely issue this fund to the public. This is a form that helps small investors reduce risks and get high efficiency with low investment costs.
Individual investment fund (Member fund): A type of fund issued separately for a group of investors including: individuals, organizations, large enterprises … often pre-selected. The feature of this fund is lower liquidity compared to collective investment fund, large amount of capital and investors can participate in fund control.
Based on the capital mobilization structure
Closed-end fund: Closed-end fund certificates are only issued to the public once. With, the number of fixed fund certificates and the fund does not redeem when the investor intends to sell. This type of fund has high stability and liquidity.
Open-ended funds: Unlike closed-end funds, open-ended funds are not limited to time as well as the number of participants to invest. Investors can resell fund certificates based on their net asset value at the time of transaction. This is why open-ended funds are more flexible and liquid than other types of investments.
Based on the organizational structure and operation of the fund
A corporate hedge fund: As the name implies, an hedge fund is essentially a company. It is based on the law and is run by a board of directors – the highest governing body elected by the investors themselves. The main task is to control the entire operation of the fund. And choose a fund management company, supervise all their investments and can change their management company if it doesn’t work.
Contract investment fund: With this model, the management company will open a fund and call to raise capital from investors and make investments based on the goals set out in the fund’s charter.
Above is general knowledge about investment funds, Fastloans.PH wants to send to those who are interested.
Who should join investment fund?
The investment fund is suitable for any person, regardless of gender, age, organization or individual.
Subject is looking for a new investment channel (in addition to bank savings, real estate investment …) to stabilize and increase income.
People with moderate financial capacity, limited time and resources to be able to invest effectively in financial markets.
Businesses build long-term savings, retirement benefits for employees to attract and retain talent, or to diversify their business portfolio.
Especially, for amateur investors with little capital, investment fund is the best choice to earn profits while ensuring safety, if you know the right reputable investment fund.
Criteria for knowing a reliable investment fund
Factors about investment style
Investment style is very important when choosing to invest in a fund. While investors are only interested in one thing only is profit. But underestimate the effective balance between risk and return. This is compared through an index of managerial performance (ER), in which annual returns are divided by the annual risk ratio. The higher the ER, the more efficient the company’s performance is.
A reputable investment fund will balance buy and sell orders at a safe level. Have an ideal average risk tolerance ratio of 1/5 of an investor’s money in this fund that is likely to lose. This is much lower than the 100% likely theoretical loss in the S&P 500.
In addition, to evaluate the investment style of an investment fund, investment strategies must also be considered. The more clear and unified an investment strategy is, the more reliable the investment fund is.
Good history of return & risk management
The data reflects the manager’s ability to effectively manage all types of assets, so that the fund can regain profits, reducing risk as much as possible. The rate of loss is within the allowed limit. In addition, the fund’s investment performance reports should be checked once a year to avoid fraud in the reports.
Investors need to consider the return history of an investment fund in the long term. Can be viewed on a yearly, quarterly, and monthly basis. From there, it is possible to objectively evaluate whether the investment history of this fund is really good or not. If an investment fund has a return rate of about 200% a year, but with a loss rate of 123%, it should definitely not invest.
Relevance between the size of the fund and the form of investment
There are many different investment funds that will have different strengths. For example, an equity fund should diversify its portfolios only with stocks of potential and well-established businesses. There should be no other investment items such as bonds and currency.
This means that investment funds should specialize in their investment fields, the rate of successful investments will be higher than those of amateur funds.
The long-term fund management evaluation dossier is a review of the fund’s organizational and managerial structure. Such as management board, expert team, analysis and support team. To ensure that investor funds are being assigned to a professional manager.
Low profit turnover
Regardless of the type of mutual fund, revolving profits should be as low as possible. Because commissions for transactions are reduced, this amount is not included in the fund’s spending rate.
Be wary of costs
Mention the types of expenses and expenses of a mutual fund. The better the quality of the fund’s investment, the less revenue, marketing and distribution costs. Since then the ratio of revolving profit and cost will also be lower. Low-cost funds outperform high-cost funds.
Total competitive profit
The investment fund’s total return on investment is proven by its positive performance. The profit of this fund will be compared with other funds. Or compared to the standard level of investment that the fund chooses. And the index of the external market over a period of three to ten years.
Positive and transparent analytical reports
The analytical comments of investment research analysts are an important source of information to evaluate the investment quality of investment funds. A professional investment fund as mentioned above will have a full range of departments from experts to traders.
They will publish market forecasts and reports publicly on the website. Or by email to regular investors. As a result, investors will learn how professional traders analyze the market and always keep an eye on the market’s trend.
If you are eager to make a profit from your idle money, do not hesitate to learn more about the Fund. You will have the opportunity to participate in the investment under the guidance and assurance of experts.
Referrence: Investment fund from Wikipedia