Most of the current investment instruments require considerable knowledge and practical experience in their use. Especially you can not do without special knowledge if you expect to receive a solid share of the profits. But what about those who do not have the time or desire to “immerse themselves in the material”? We advise you to pay attention to mutual funds based on the principle of trust capital management.
Mutual investment funds are engaged in the accumulation of funds that are invested in various projects in order to make a profit. The creation of the fund, its legal registration and the direct conduct of business is carried out by the management company. She, in the terms predetermined by the contract, distributes the income of the fund among the investors, in proportion to their shares.
Among all possible areas of investment, mutual funds invest in:
- stock;
- bonds;
- real estate;
- deposit certificates and deposits;
- mortgage
- loans;
- artistic values, etc.
The activities of investment funds are regulated at the legislative level, which reduces the risks of fraud in this area. At the same time, no one can insure the depositor against the risk of reducing or even losing the invested funds. Mutual funds in Russia can only predict the return on investment in them. This is done on the basis of a superficial analysis of the market and indicators of past reporting periods. But any guaranteed income in this area is extremely rare.
Investing money in a mutual fund provides for the acquisition by the investor of a part of his assets - an investment share. Most of the funds set a minimum contribution for such a share, which is measured in shares of the total assets of the mutual fund. The investment share of the fund certifies the participation of its owner in the association of investors and gives the right to receive a part of the profit. The depositor has the right to demand productive trust management of funds, the right to control the management company, the right to compensation for the value of the share in case of termination of the contract and violation of its terms. In addition, an investment share is a security that can be sold, bought or pledged.
As for the risks of losing capital, in comparison with other investment options, they are not so great. As a rule, such funds are created by large management companies with investment experience. Mutual investment funds declaring conservative principles of their work are close in reliability to banking structures. However, the return on investment in them hardly exceeds bank deposits.
Not all funds are conservative in their investment strategies. So, in exchange for higher risks, an investor can receive an annual income equal to 40-60%, and in some cases even 100% of the initial investment. In any case, the profitability of the fund directly depends on the chosen instruments and the aggressiveness of the principles of work.
Types of mutual funds
Any private investor who wants to invest in mutual funds must understand their types and understand the differences. Experts divide all investment funds existing in Russia into several types:
- Open share. In it, investors are endowed with the right to freely dispose of their shares. Investments in such funds are characterized by high levels of liquidity and accessibility to the general population, due to the minimum amounts for contributions.
- Interval PIF. The contracts pre-determine the time intervals in which the unit holders have the right to sell their shares. Similar rules are established for the withdrawal of funds.
- Closed-end investment fund. Such funds operate for a strictly defined period, at least 5 years. The sale and withdrawal of funds before the expiration of the mutual fund is excluded, however, in some cases, the sale of shares to other fund participants is allowed. A closed mutual fund is a kind of private club of investors created for a specific project. The value of the shares is calculated in millions of dollars, which is why participation in them is available only to wealthy investors.
There is a classification of mutual funds according to the areas of investment. It highlights:
- Equity funds. The predominant direction of investment of such funds is shares. Potentially, such funds have the highest levels of return, but are also characterized by fairly large risks. According to experts, the most promising investments in equity funds will be long-term investments.
- Bond funds. They are distinguished by their conservatism, since bonds assume a lower but stable yield. Ideal for investors who are looking for the most reliable and long-term investment instruments.
- Money market funds. The main part of the assets of such funds is contained in deposits, due to which they are characterized by a guaranteed, but relatively low return.
- index funds. index funds are contained in the shares of companies listed on the stock market. Their main income is earnings on stock indices. It should be noted that with relatively low risks, it can be quite high.
- . Each such mutual investment fund is the founder of an enterprise. The creation of such funds is aimed at a specific type of business or commercial structure. According to investors, investments in private equity funds are characterized by increased risks with high rates of return.
- Real estate funds. The goal is to invest money in a specific construction project. Such mutual funds are organizations, mostly of a closed type. They are created for a long period, which is why they differ in long-term investments. Quite an attractive investment option, characterized by high returns. It is especially attractive to wealthy players.
- Mixed investment funds. The assets of such funds are contained in various financial instruments. They differ in average rates of return and average terms of investments. Investing in mutual funds of this category allows investors to diversify risks as comfortably and quickly as possible.
Advantages of mutual funds for investors
According to the reviews of professional investors, we highlight the main advantages of investing in mutual funds:
- Transparency of investment activity. In addition to strict state control over the activities of mutual funds, an important factor in their credibility is the transparency of their activities. Anyone can find financial reports of organizations in the public domain, which eliminates fraud.
- Trust management allows you to make investments in any investment instruments, even without the necessary knowledge. Professional management reduces risks as much as possible.
- By investing in a fund with different assets, the investor gets the opportunity to expand the possibility of making a profit within the framework of one project.
- Availability of mutual funds. Establishing a minimum size for deposits makes investing in them the easiest way to invest. Such investments are available today for most potential investors.
- Investment units have high liquidity, which is why investors in most open mutual funds have the opportunity to withdraw their funds at any time during the life of the fund.
How to choose a mutual fund?
The most common mistake when choosing an investment fund among novice Russian investors is the fact that they pay attention to the institution's profitability indicators. According to the objective opinion of major players, the amount of profitability is relative, since it is predicted, not calculated. Using this approach in choosing a fund, there is a high probability of investing in a mutual fund with an aggressive strategy, which will be able to show stable high results only as an exception.
According to experts, when choosing a fund, it is important to proceed from the tasks, goals and priorities in investment activity. In view of this, consider the aspects that should influence the choice of the investor:
- The main goal of any investment activity is to make a profit. If the focus of the goal is a large income, it must be borne in mind that it will necessarily be associated with large risks of losing the money invested. If you want to minimize possible losses, investors need to focus on equity funds. If you want to minimize risks, bond funds are perfect.
- Timing of investment. Speaking of short-term investments, you will have to choose between bond funds and money market funds. Longer-term investments are possible in real estate or stock funds.
- The amount of capital. The main rule: the smaller the amount of investments, the narrower the range of possible mutual funds for choosing. As a rule, the minimum amounts for contributions are invested in money market, stocks and mixed funds.
- Rating. The Internet is replete with all kinds of mutual fund ratings, depending on various criteria - profitability, asset volumes, funds raised, etc. When choosing between them, use only trusted and reputable sources.
- Having a license. Before investing, read the documents of the fund you have chosen, its license for investment activities. Be sure to check the existence of the Trust Rules.
In any case, regardless of the fund you choose, you must be aware of the essence of your actions, taking into account the possible consequences listed above. Without understanding the working mechanisms, entry conditions, management control schemes, there will be no point in investing in any fund. By studying the details of the activities of mutual funds and choosing several investment funds for investments, you will create conditions under which your capital will definitely make a profit, even if investments are made in the simplest, but conservative and reliable mutual funds.