Investment funds – a way out of daily business

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Investment funds – a way out of daily businessWe hear frequently about investment funds, but many of us do not know very well what they mean. It may seem curious, but common funds available on the Romanian market are among the simplest known funds in the world today.

They are not sophisticated financial products, but basic and can be an alternative to bank deposits, life insurance or other products that we are aware of.

What does, exactly, these investment funds? Are collective portfolios managed by specialists who follows an investment policy, wich means they place your savings in various financial instruments, with different levels of risk in order to achieve capital growth. Once you get your money in such a fund, you can consider yourself an investor.

Increasing the amount invested is reflected in the unit price of the fund, which is specific language NAV (net asset value), and the investor receives a number of units resulting from the invested amount to the price of that day. Thus, the investor will hold a portfolio of units in which they can assess daily NAV following website management company.

There are four popular categories of funds: money and bonds, that have a saving/investment profile, low-risk environment and diversified funds and shares with greater growth potential, but also high risk in proportion to earning potential. The principle  is always the same: “no risk, no gain.” There is also a fifth category, other types of funds, where we can find funds that not fall into the four categories mentioned above.

Monetary funds and bond resources placed in bank deposits, certificates of deposit, bonds, government securities and others and diversified funds and shares investing mainly in equities and other money market instruments and bonds.

Fund manager, that put your money in various financial instruments should be subject to strict transparency. That is obliged to provide key documents to investors funds, NAV daily reports and statements quarterly, annual, and other information. Basically, you will know at any moment what is happening with your money. In addition, laws and regulations are now very strict in order to protect investors and to give them equal treatment.

To control investment risk, legislation is imposing limitations investment fund. Thus the portfolio manager must comply with the limits for exposure to an issuer (for example, more than 5% exposure to an issuer of shares or bonds) and may not place more than 20% of fund assets in deposits at a single bank.

This works as “do not keep all your eggs in one basket”. A prudent diversification of a diverse portfolio of assets reduces the risk of non-recovery of a semnficiative investment, compared to individual exposure on a single instrument.

From year to year, the investment fund market in Romania has gained ground on deposits, and therefore investors are seeking to diversify savings/investments to realize gains in a falling market of interest rates (such as deposits) and, last but not all, the flexibility and ease of managing money.

While trying to make some profit with a business of your own, such as , you can trust yourself in investment funds as well.

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