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Investment Funds: A Guide for First Time Investors

April 14, 2016

An investment fund is a common term used for when several investors use their own capital to collectively buy securities with each Shareholder retaining ownership and control over the individual shares.

An investment fund offers a greater variation of investment opportunities and lower fees than achieved by individuals making investments on their own. The most common types of investment funds are the following:

  • Mutual funds.
  • Exchange traded funds.
  • Money market funds.
  • Hedge funds.

Individual investors do not decide where to invest the funds’ assets, this responsibility lies with the Fund Manager, the investor’s initial decision is choosing a fund to invest in based on its risk, objectives and other aspects. The full role of the Fund Manager is to decide which securities it should hold, in what quantities and when they should be bought and sold and generally oversee all of the funds activities.

An investment fund can be broad-based, such as an index fund that follows the Standard & Poor’s 500 (an American stock market index on the capitalisation of 500 firms that have shares listed with the New York Stock Exchange) or it can be more refined, such as an Exchange Traded Fund (ETF) that only participates in small technology stock investment.

The International Investment Funds Association is an organisation dedicated to the promotion of investment fund investors and Shareholders, and to enable the growth of the investment funds industry to a global level. They act as a regulator for advancing the understanding of investment funds internationally, and therefore encourage observance to the rules and keep high moral standards by all parties in the industry. You can contact the IIFA if you have any questions, or read more here.

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