If you decide to invest in a bank often get the advice to take part in a mutual fund. It is a very good alternative if you do not have too many resources and want to enjoy a higher return on such shares. It is also useful if you do not have much investment knowledge.
What is a mutual fund?
In fact, a mutual fund a pool of money from several persons. Professional investors manage the resources and try to maximize return through the right moment to sell and implement.
What kinds of funds are there?
There are many different types of investment. Often you see a similar fund with various banks to return. Broadly you a few categories:
* Investment in shares can be divided into regions such Europe, America or Japan.
* Funds for fixed income securities representing bonds. These can be divided into several regions.
* Theme funds: e.g. a fund that invests exclusively in pharmaceutical shares or shares that pay high dividends.
* Real estate funds: mutual funds that only invest in property shares.
What are the advantages of a mutual fund?
There are several advantages. So you can participate for a relatively small amount, often as little as € 50. An important advantage of participation in an investment fund that the risk is spread. The fund manager buys a small position in many stocks or bonds. The negative exchange risk if a large share going down is limited. Conversely, just because you spread that no significant positive results have to expect. Furthermore, the cost, depending on the fund you choose, is relatively low.
Which fund should I buy?
Depending on the goal you have in mind the investment you choose from the many funds for hands. Would you in the long term (+ / – 10 years) for a higher yield compared to a savings account, you can choose the best one equity fund that invests in Europe and worldwide regions Europe, USA and Japan. Do you want less risk, then you better buy a bond fund.
What are the costs?
The costs vary by fund. Usually you pay a single rate for the purchase (and on sale). Furthermore, the manager will charge an annual fee and there are other costs, eg for preparing the annual report or prospectus. The fee of the manager will increase as a risky fund. Always ask for the Total Expense Ratio (B =). This figure includes all costs that an operator charges a year (excluding one-time entry and retirement costs). The bank administering the fund, B is obliged to publish once a year.
How do I know whether the fund is performing well?
The performance of the manager are usually measured against a benchmark, an independent reference. A good run at least achieves the same result as that of the benchmark.