A fund or investment fund invests in different assets such as bonds, real estate or equities in order to compensate for possible fluctuations in the value of individual securities. A loss in the value of an investment has little effect on the fund assets and thus on the fund unit. Which of the possible financial investments a fund invests in is depends on the investment strategy defined in each case. As an example, there are investment funds that only invest in certain economic regions such as Asia or Europe. Others invest their capital, for example, in material assets such as real estate or only in equities in certain sectors. Constant monitoring by you is not necessary. Once you have chosen a fund, fund managers and automatisms monitor the market development in order to be able to react if necessary.
Funds proceed in two different ways with the interests and dividends of the shareholders. “Distribution funds” pay out the profits regularly to the shareholder, while “accumulation funds” continue to invest the money and thus use the compound interest effect to the advantage of the investor.
Investment funds invest the capital of the fund in a bundle of different assets - depending on the fund type - such as shares, bonds or real estate. The responsible fund managers must adhere to a legal risk diversification, according to which a maximum of 10 percent of the fund assets may be invested in securities of a single issuer (e.g. a company). The resulting diversification of the money invested can offset losses in one security against gains in other securities.
Funds offer the opportunity to invest money very flexibly, as fund units can generally be bought and sold on each trading day. In addition to one-off investments, savings orders can also be set up from as little as 25 euros a month, with contributions that can be increased or reduced at any time. In the same way, regular withdrawal orders are no problem.
This does not apply to open-ended real estate funds. Here special periods apply for deposits and disbursements, which are to be kept.
In addition to the annual and semi-annual reports on all transactions made, many fund companies provide information on the composition of the fund assets, for example sorted by region or sector, and the largest individual positions of the respective funds online. The costs incurred by investment funds are also clearly disclosed. In addition, investors have the opportunity to monitor the daily performance of the funds online or in daily newspapers.
The "Essential Investor Information" or "Key Information Documents (KID)" summarise the most important information on funds for an investment decision in an easily understandable manner on just a few pages and are the same for all of Europe. This makes it easier to compare products with each other.
The insolvency of a fund company does not affect your assets.
The capital of the fund investors, which is separate from the assets of the fund company, is special assets. This separation protects the investment fund from access by the investment company itself or its creditors, even in the event of insolvency.
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