Category: Funds

What Are The Different Types of Investment Funds?What Are The Different Types of Investment Funds?

Investment funds refer to capital owned by multiple investors for collectively buying securities wherein every investor retains his control and ownership of his shares. So, if you plan on investing your hard-earned money, investment funds can be an attractive option. With an investment fund, you get access to a wider range of investment options, better management, and low investment fees. You will come across different types of investment funds that have been briefly discussed below. Check out Kryptoszene.de for better ideas.

Types of Investment Funds:

  • Open-end Funds: Most of the available investment funds will be open-end mutual funds. These will issue shares whenever investors start to add more money to this pool and will retire the shares as and when investors redeem. They are priced one time at the close of a trade day.
  • Close-end funds: These will trade almost similar to stocks and are the managed investment funds using fixed numbers of shares. A NAV or Net Asset Value is calculated for the fund but trades depend on investor demand and supply. These funds are termed “close-end” since they will not issue extra shares during the normal course. However, a mutual fund will issue and redeem shares every day because investors keep buying and selling out of these funds. This explains why mutual fund shares are open-ended but closed-end funds will have a single public shares offering after which these shares are traded among investors on an exchange.
  • ETFs: These are Emergency Trade Funds that grew as an alternative to the mutual funds. They were designed for traders yearning for more flexibility in investments. Like close-ended funds these can be traded on stock exchanges and they are priced and traded throughout a business day. They are cheaper compared to mutual funds and can be passively managed. There are no large investment minimums for ETFs and they are far more tax-efficient. You can easily profit when markets are down.
  • Hedge Funds: These are investment funds that are different from ETFs and mutual funds. They are actively managed by portfolio managers and made accessible to accredited investors or those who have substantial wealth to start with. Hedge funds are not SEC-regulated and you are free to invest in different types of assets using different strategies. Hedge funds typically invest in far risky assets besides bonds and stocks, ETFs, alternative assets, and commodities. These also get more publicity since some hedge funds make huge bets on personal securities that get them press attention. People owning hedge funds typically become wealthy and this too catches the eye of the media.
  • Mutual Funds: These are the earliest types of investment finds and refer to funds that are made from money from multiple investors keen to purchase securities. Here, the cluster of assets will be priced and then sold daily to the people. So, prices of mutual funds will change once every day. These will not be traded on exchanges and investors can buy the shares directly from the company or through intermediaries like brokers. Unlike other types of investment funds prices here change every day but investors cannot expect to make profits by trading shares within a trade day. This explains why these are a good fit for seniors for retirement planning. Investors can have a diversified portfolio and they do not even need to manage this. But, mutual funds can change you fees that may diminish your returns slightly.