Information on investment fund operations

Information on investment fund operations



Contents

  • 1 investment funds
  • 2 Funds operations
  • 3 characteristics of investment funds
  • 4 Benefits of investment funds
  • 5 References

investment funds

Investment funds (English: Investment Funds) is a method used to collect funds from a group of people in order to invest them in securities , such as bonds, stocks , and other assets. All investment fund assets are called an investment portfolio. [1] Mutual funds are defined as a financial basket that allows investors to pool their money in a single investment fund, and it is managed using professional administrative means. [2] Another of the definitions of mutual funds is a group of diversified investments, such as money , stocks , and bonds, which are grouped together in a single fund that is funded through private investments in individual and institutional investors.[3]

Mutual Fund Operations

Mutual funds depend on the application of a set of processes: [4]
  • Pricing: It is the method that is used to define the price of each of the investment units in the investment fund. Pricing is determined according to the nature of the investment funds upon their establishment, and depends on the use of two systems, namely:
    • Closed Fund System: The system in which the investment fund manager does not announce the prices of his units until the last day of the life of the fund, but this does not mean that the units do not have specific prices during this period, as it is possible to know their value by exchanging them within the financial markets or Selling among investors.
    • The open fund system: is the system in which the fund manager chooses a specific day to announce unit prices in the fund, and this day may be weekly or monthly, and it is called the pricing day that enables current investors to leave the fund to obtain financial liquidity, and it also contributes In the entry of investors who want to participate in the investment within the fund.
  • Imposing fees on investors: These are fees that the investment fund imposes on investors in order to save part of its financial costs, especially those related to private operations in the funds, and some funds impose fees for participation, such as investment funds whose contents are traded in the financial markets in a regular manner Also, some other funds depend on imposing financial fees to leave, and also some types of funds link these fees to the time period in which the investor remains within the fund, and the value of the fees is reduced as the duration of the investor’s stay in Sun increases Duke of investment.
  • Recover and circulation: They are among the elements used to attract investors to investment funds, as these funds are designed to provide the appropriate means to achieve the role of recovery and trading , so the open funds system depends on the application of redemption that provides investors with the possibility to recover their money; therefore this type of fund depends on the retention of by its director of financial liquidity, which relies on a combination of factors, such as experience for the fund manager , financial and economic environment in which the Fund there , including, but funds closed system can not obtain financial liquidity Only through its components trading in the financial market regulator.
  • Administrative fees: These are financial fees that the fund manager obtains in exchange for his management. The manager's fees are calculated as a type of financial incentive that he receives in return for his contribution to the growth of the investment fund. Therefore, these fees are calculated through what is known as the net worth of the assets within the fund. And the fund manager calculates the value of these assets periodically, and in the open fund system the value is calculated on the day devoted to pricing, and the manager gets a deduction of his financial wage based on a percentage agreed upon in advance, and often the special percentage ranges In administrative fees between 1% - 5% during the year.
  • Reserves: It is a financial value that the investment fund retains from the profits, in order to reach stability and balance after paying the value of the shareholders ’profits in the investment fund, and providing compensation for any losses that may appear in some cases.

Mutual Fund Characteristics

Mutual funds are distinguished by many of the characteristics that distinguish them as an important financial instrument, and the following are a group of the most important characteristics of these funds: [5]
  • The difference in the distribution of the net assets value , due to the fact that investment funds rely on special regulations and legislation to organize their work within the country.
  • The variety of forms of investment funds that depend on both the public offering and the private offering in dealing with investment units.
  • Ensuring the establishment of minimum limits for investment and the amount of investment units published within the prospectus that include information about the fund, the supervising body, the manager responsible for its management, and a set of other information that must be provided to existing and new investors.
  • Relying on the existence of an independent fund management is completely different from the private management of the facility that it issued, as legal legislation provided what leads to the investment fund’s commitment not to manage it, which contributes to a lack of conflict of investment interests.

The benefits of investment funds

Investment funds are considered a popular investment tool among investors because they contributed in providing many benefits to the investment sector , including: [6]
  • Diversity : (English: Diversification) is one of the most important benefits of investment funds for all types of investors who are interested in the diversity of financial assets in their funds, and the process of diversification depends on having a mix between the different types of investments in the investment portfolio in order to use it as a method of risk management .
  • Division : (English: Divisibility) is one of the benefits of investment funds that contribute to helping investors who do not have much money to buy securities through the provision of investment funds with smaller classes in terms of the value of securities, and these funds provide the possibility to make periodic investments through implementation Medium-cost monthly purchase plans.
  • Liquidity : (Liquidity) is the ability to participate and withdraw from investment funds easily, because of the possibility of selling the investment fund within a short period of time, and there is often no significant difference between the current value of the fund in the market and the selling price.

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