Investing in Investment Funds
Investing Funds are for those investors, who do not want to buy and manage their stocks directly. This kind of investment is a good decision for the buy and hold investors, because they protect the beginner individual investors from costly mistakes. Investment Funds do have a high entry-fee or closing fee, but the cost of the mistakes what avarage beginner investors do are much higher. Moreover, the overall return of the investment funds were higher in the last decade than the overall return of the avarage investor who purchased his stocks directly.
Open-End Funds
Open-End Funds can issue unlimited amount of shares. This means, when the request on their shares is improving, they issue more shares. When an investor wants to sell his open-end fund shares, the Fund buys it back. The cost of buying an Open-End Fund is charged in a premium, which usually ranges between 5%-9% of the invested capital. This cost is high, so the investor must determine the possible return on this investment.
Closed-End Funds
Closed-End Funds issue a determined amount of shares. These Funds have buy and sell prices and can be traded like a stock. The buying commission is much lower than at an Open-End Fund, usually approximately 1%-1,5%. When an Open-End Fund has got mostly the same investing performance like a Closed-End Fund, the Closed-End Fund will have greater pay-off. This is because the premium of the Open-End Funds is much higher.
Balanced Funds
Balanced Funds contain stocks and bonds as well in a portfolio. This type of instrument is made for those kind of investors, who do not want to buy the bond component of their portfolio separately. These Funds are a mixture of safety and moderate growing. Their return and risk depend on their components. When the Balanced Fund contains more equity assets, it could lead to a higher return (and losses). A Balanced Fund with a higher bond asset is made for capital preservation.
Speciality Funds
Speciality Funds are made for those investors, who do have an idea where to invest. Sector Funds are those Funds, which invest in a special sektor. For example technology, agriculture, health, materials, etc. These Funds are extremly volatile. An other type of the specialty Funds are Regional Funds. These Funds invest in a special region, for example in East Asia or into a special country, for example into China or India. Investing in speciality Funds needs more research than an average Fund, because the risk factor of these Funds is higher.
