investment funds
Investment funds are a method used to provide funds for a group of investors by keeping their own securities, and each investor retains ownership of his securities, and the investment fund contributes to providing a variety of investment opportunities.
Investment funds are also known as a pool of money owned by a group of investors, and it is managed by specialists in the field of financial investment, who make decisions to buy or sell a group of securities, such as bonds and shares, which contributes to the diversification of each private ownership. investment fund.
Another definition of investment funds is that it is a means of collecting the money of individual investors, companies and various establishments, and then contracts with a manager or financial expert to manage the contents of the investment funds, and the goal is to provide the highest financial returns with the least possible risk.
Types of investment funds
There is a group of types of investment funds, each of which has a role in the stock market, and the following information about them:
Equity funds: They are funds that rely on the trading of investments in general, away from any ownership of companies within the private sector. These investment funds are considered the most volatile and changeable; Its value continues to rise and fall within a short period of time. Historically, equity funds have performed the best among other types of mutual funds; This is because stock trading depends on the future results of companies within their market share, which includes an increase in their revenues and profits, which leads to an increase in the value of the rights of their investors.
Fixed Income Funds: They are investment funds also called bond funds, and they invest in private debt in public and private sector companies; In order to provide income based on the distribution of profits, these funds usually contain an investment portfolio that enhances the financial returns for the investor; By providing him with a stable income when equity funds lose their value in the financial market.
Financial market funds: They are funds with a low risk ratio compared to other investment funds, and these funds are limited to investments of high quality, which are often short-term and issued by the government or local companies.
Balanced Funds: These are funds that aim to provide a balanced mixture of security (low risk), capital, and income. Balanced investment funds depend on the application of an investment strategy in stocks and fixed income, while a typical balanced fund contains 60% of stocks, and 40% of fixed income, but it is possible to achieve a balance at the maximum or minimum value of the assets.
International funds: They are investment funds also known as global funds or foreign funds, and they are often used by investors who invest their money outside their countries of origin, and these funds depend on the application of investments all over the world, and often have difficulty in classifying private funds. It is possible that its risk or safety rate may increase more than that of funds for local investments; Because it tends to be more variable as a result of many factors such as political influences.
Specialized Funds: It is one of the most comprehensive investment funds; Because it contains more than one category of securities, most of which are popular, but these funds dispense with the diversity of categories within the economy sector, but rather target funds belonging to certain economic sectors, such as health, money and technology, which increase the chances of achieving profits, and the types of these funds are:
Regional Funds: Funds that are interested in implementing investment within a specific region; That is, the focus is on a specific place, such as governorates or countries, and these funds are easy to use in investments that depend on the purchase of foreign shares.
Social funds: Also known as ethical funds, they depend on the application of investment in companies that achieve specific investment criteria linked to ethics; It doesn't invest money in arms or liquor companies.
Index funds: They are funds that are interested in investing within number indicators, and include the results of stocks in the financial markets. Index funds are characterized as being of low risk.
Features of investment funds
Investment funds are one of the most popular investment options among people; Because it provides many advantages, the most important of which are:
Professional management: is the provision of investment funds by a group of managers who are looking for the best investment methods for securities, and monitor the performance of investment funds.
Diversity: It is the ability to invest within the securities of a group of companies and institutions, which contributes to reducing the risk ratio in the event of bankruptcy or loss of one of the companies.
Liquidity: It is to provide the possibility of selling shares of investors in the event that any investor needs to obtain financial liquidity.
investment fund risks
Investment funds are affected by a range of risks, and they are distributed according to the following categories:
Low-risk investment funds: They are funds that are characterized by their low risk, and have the following characteristics:
low level of risk; Because investors are interested in reducing risk in order to stay away from the negative results resulting in the short term of the investment.
Stay away from all fluctuations in investment prices to ensure that all investments remain safe.
Relatively low profits; Because of the low level of risk approved in these funds.
The constant need of investors to obtain financial liquidity.
Medium-risk investment funds: They are funds with relatively medium risks, and they are characterized by the following characteristics:
The ability to withstand various changes in prices, while accepting the idea of financial losses in the capital.
The need for liquidity is almost moderate.
High-risk investment funds: These funds depend on the following characteristics:
There is a great deal of experience among the investors in these funds within the financial markets.
The need for financial liquidity is very little.