Fund

An investment fund is a collective capital pool in which the money of many investors is pooled in order to invest it as profitably as possible according to a defined strategy. A fund is like a basket filled with various securities. A specialized fund company takes over the management and makes decisions about the purchase of stocks, bonds, real estate, or commodities. A key advantage for fund unit holders is risk diversification: since the capital is not invested in a single company but in a variety of different securities, price losses on individual investments have little impact on the overall result. In addition, even small amounts give investors access to markets that would otherwise be reserved for large investors, such as the bond market. From a legal perspective, the invested capital is protected as a special asset. This means that it always belongs to the investors and remains unaffected even in the event of the insolvency of the bank or fund company.

There are generally two types of funds. In actively managed funds, experts attempt to outperform the market through a targeted selection of investments. Passive index funds, on the other hand, track an existing index. Most of these are exchange-traded funds, known as ETFs. (It should be noted that there are now also actively managed ETFs.) Unlike active funds, which often charge higher management fees, ETFs are attractive due to their low costs. For investors, funds offer the particular advantages of convenience and diversification, as they do not have to monitor a large number of individual securities on a daily basis themselves.