Types of investment funds



Contents

  • 1 investment funds
  • 2 types of investment funds
  • 3 The advantages of investment funds
  • 4 risk of investment funds
  • 5 References

investment funds

Mutual funds are a method used to provide funds for a group of investors by keeping their own securities, and each investor maintains their ownership of their securities, and the investment fund contributes to providing a range of diversified investment opportunities. [1]

Known investment funds also as a pot of money involved in the ownership of a group of investors, and is managed by specialists in the field of financial investment, and who make the decisions of the sale or purchase of a group of securities, such as bonds and stocks , thereby contributing to private ownership diversity of each shareholder The investment fund. [2]

Another of the definitions of investment funds is that it is a means of collecting money for individual investors, companies and various establishments, and then contracting with a manager or financial expert to manage the contents of the investment funds, and the aim is to provide the highest financial returns with the least possible risk. [3]


Types of investment funds

There are a set of types of investment funds, each of which has a role in the stock market , and the following is information about it:
  • Equity funds: These are funds that depend on circulation of investments in general away from any ownership of companies within the private sector. These investment funds are considered the most volatile and changing, as their value continues to rise and fall within a short period of time. Historically, the performance of equity funds is considered the best among other types of investment funds, because stock trading depends on the future results of companies within their market share , which includes an increase in their revenues and profits, which leads to an increase in the value of investor rights in them. [4]
  • Fixed income funds: They are investment funds also called bond funds, and are invested in private debts in public and private sector companies, in order to provide income dependent on the distribution of profits, and usually these funds contain an investment portfolio that enhances the financial returns of the investor by providing fixed income For him when equity funds lose their value in the financial market. [4]
  • Financial Market Funds: They are funds with a low risk ratio compared to other investment funds. These funds are limited to high-quality investments, which are often short-term and issued by the government or local companies. [4]
  • Balanced Funds: These are funds that aim to provide a balanced mix of safety (few risks), capital , and income. Balanced investment funds depend on the application of an equity and fixed income investment strategy. The typical balanced fund contains 60% of the shares and 40% of the fixed income, but it is possible to achieve balance at the maximum or minimum value of the assets . [5]
  • International funds: They are investment funds also known as global funds or foreign funds, and are often used by investors who invest their money outside their countries of origin. These funds depend on the application of investments in all parts of the world, and often suffer from difficulty in classifying their funds; As it is possible to increase its risk or increase the level of security in it more than the funds for local investments, because they tend to be more variable due to many factors such as political influences. [5]
  • Specialized funds: They are among the most comprehensive investment funds, because they contain more than one category of securities that are considered to be most popular, but these funds dispense with diversity in the categories within the economy sector , but rather target the funds of certain economic sectors, such as health, money , and technology that are increasing the prospects for achieving profits, and these types of funds: [5]
    • Regional funds: are funds that are concerned with the application of investment within a specific region; that is, the focus is on a specific place, such as governorates or countries, and these funds are characterized by ease of use in investments that depend on the purchase of foreign shares.
    • Social funds: Also known as ethical funds, depend on the application of investment in companies that achieve specific investment criteria and are linked to ethics, as money is not invested in arms or alcohol companies.
  • Index funds: are the funds that are interested in investing in number indices, and include the results of stocks in the financial markets. The indices of funds are characterized by being low risk. [5]

The advantages of investment funds

Mutual funds are among the most popular investment options among people because they provide many advantages, the most important of which are: [6]
  • Professional management: is the provision of investment funds, a group of managers looking for the best investment methods for securities, and monitoring the performance of investment funds.
  • Diversity: It is the ability to invest in the securities of a group of companies and institutions, which contributes to reducing the risk ratio in the event of the bankruptcy or loss of a company.
  • Liquidity: It is the provision of the ability to sell shares of investors in the event that any investor needs to obtain financial liquidity.

Mutual Funds Risks

A number of risks are affected by investment funds, and they are distributed according to the following categories: [7]
  • Low-risk investment funds: They are funds that are characterized by their low risk and have the following characteristics:
    • Low level of risk because investors are interested in reducing the risk in order to stay away from the negative results resulting in the short term investment.
    • Avoid all fluctuations in investment prices to ensure all investments remain safe.
    • Achieving relatively low profits due to the low percentage of risk approved in these funds.
    • The constant need of investors to obtain financial liquidity.
  • Medium-risk investment funds: They are funds with relatively medium risks, and they are characterized by the following characteristics:
    • The ability to withstand various price changes while accepting the idea of ​​financial losses in capital .
    • The need for liquidity is almost moderate.
  • High-risk investment funds: These funds depend on the following characteristics:
    • The presence of significant experience among investors in these funds within the financial markets.
    • There is very little need for financial liquidity.

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