✔️ Information reviewed and updated in April 2024 by Pedro Martínez González

There is no longer a pretext for not investing your savings because today there are a large number of instruments and mechanisms which you can easily access such as investment funds. This allows many people to grow their savings without becoming a financial doctor.

A perfect example is mutual funds, one of the instruments with the best return-to-risk ratio. That is why here we will talk about everything you need to know about the funds. We will tell you what they are, advantages of investing in them, reasons for doing so, among other information.

➡What are investment funds? ✨

The best way to define an investment fund It is like a group of investors who are in charge of investing their money in multiple projects. This is done through an administrator or professional management company, which is responsible for managing, investing and operating the investment fund money for a commission.

Among the most striking characteristics is that the investment fund can be number and group all types of projects. In addition, investors do not need to disburse large amounts of money, since, being numerous, the contributions can be smaller.

➡How does an investment fund work? ✨

The mechanism of an investment fund is simple, as we already told you, all members make a contribution to the fund. The accumulated money is invested in a series of projects what creates an investment portfolio. These contributions are known as participation.

When you make a contribution, you are actually buying a share, a piece of the investment portfolio. The value of the shares is calculated by dividing the equity value of the fund by all the shares issued. If you invest 10 in a fund with a share value of 1,000, you will be acquiring 10 shares.

➡Diversification of projects✨

One of the points that investment funds have the most is the fact that they they tend to diversify their investments . That is, they do not leave all the eggs (money) in the basket, but rather distribute them in different baskets to improve performance and reduce risks.

The investment can be distributed according to what is determined by the fund and its administrator, for example, 10% in debt, 20% in clean energy, 50% in technology and 20% in infrastructure or construction. In this way, if the debt fails, then it will have the support of the rest of the investments.

➡Advantages of investing in funds✨

Investing in funds offers many advantages, which is why this turns out to be one of the most popular mechanisms for those looking for low risk. According to experts, these are the main advantages of investing in mutual funds.

• They are accessible: One of the main advantages of the funds is the fact that these They turn out to be very accessible. In general, the cost of shares is lower than that of other assets, in addition to many funds accessible through brokerage houses or brokers and banking institutions.
• Fast entry and exit barriers: Another great advantage is that you can quickly buy or sell your shares in mutual funds . This is a huge plus, as it means an accessible entry barrier and an exit that is even easier to open, such as a door without a lock.
• Lower risk: Although the risk does exist, many of the mutual funds have a low risk Because, by diversifying investments, the risk of their being affected in case of bankruptcy is reduced. In addition, administrators are very careful when choosing projects and companies.
• Back: By having a good number of investors behind, many mutual funds have great financial backing as well as prestige. This is both an advantage and a reason to invest if what you are looking for is security, without so much risk of losing your money.
• Lower technical requirements: Finally, you should know that it is not necessary to be a financial expert to invest in these funds. Although it is advisable to have technical knowledge, these are not as necessary as in other investment instruments, which makes the funds more universal.

Types of investment funds

Next, we will tell you more about the main types of investment funds.

• Equity fund: Equity funds They are responsible for grouping different investment shares of companies. For many experts, this is the maximum level of an investment fund, since they offer good returns through a financial instrument with risk, but with attractive value.
• Fixed rent: The fixed income fund is in charge of investing, mainly, in instruments that are much more stable and with a fixed yield. This type of investment they are focused on corporate and public debt focusing, above all, on the long term.
• Mixed: These funds focus on investing jointly using both fixed and variable income investments. This in order to increase yields, but at the same time, balance costs. Here we find both equity investments and debt.
• Real Estate: Finally, we have one of the funds that offer the greatest security since your investments are backed by physical assets . That's right, real estate mutual funds are designed to invest in both construction projects and land, which provides a good return with greater security.

➡Why invest in mutual funds? ✨

There are many reasons why these are good investment projects. The first is that offer real profitability, superior to that of a bank, with very good returns both in the medium and long term.

The accessibility of THESE Funds IS Another point a favor, since I don't need a lot of money to n i Complex Processes to Invest in these Funds. Today investment funds have options for everyone through different brokers and administrators. As if that were not enough, the security and low risk make them very attractive to novice investors.

About the Author: Pedro Martinez Gonzalez

I'll tell you a little about myself! I am a financial analyst and economist with a master's degree in finance.
About my studies: I studied at the University of Salamanca for a Degree in Economics and then did a Master's in Finance in Madrid.
Do you want more information? You can read more about me here in my biography.

You can read more about me here.