What is an investment fund?

Investment funds are a savings tool. It consists of a patrimony that is formed with the contributions of a group of people who invest their capital in order to achieve the highest profitability possible. The aforementioned fund has the objective of gathering the money of all the participants so that a certain entity takes care of the administration and management.

The funds have the peculiarity of diversifying investments, so that they are destined to actions, bonds, monetary assets and other financial instruments. This ensures that the capital investments of the participants are more secure and run less risk of a possible loss.

To better understand the concept of an investment fund, it is also necessary to influence its operation. The savings that each person contributes is dedicated to the fund, which is why a great common patrimony is formed between the different participants in the fund. Given the high volume of heritage, savers could achieve a bargaining power that would be impossible in the case of doing it each on their own.

Advantages of investment funds

Economics experts appreciate several advantages of mutual funds.

  • Large amounts of money are not necessary to participate in them.
  • They are perfectly regulated and their subscriptions can be bought or sold with ease.
  • They are professionally managed, which is a very positive aspect especially for people who lack financial knowledge.

Who is part of the investment fund?

An investment fund is made up of several actors:

  • Investors: they are the people who invest their money and in return obtain shares of the fund in proportion to what they invest.
  • Management company: the body in charge of the management and administration of the fund, which decides the investment policy to be carried out.
  • Depository company: it can be a savings bank, a bank or a securities company. It must be in charge of safeguarding the fund's assets for the benefit of investors.

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