Investment Funds Made Easy

Generally, people find the world of investment funds confusing and challenging. Mainly because the elite and wealthy get to play with stocks and funds, and an average person doesn’t know much about them.

So today, let’s deconstruct the complicated world of investment funds and educate you with the basics.

What is an investment fund?

An investment fund is a pool of money belonging to numerous investors to purchase assets or securities collectively.

How does a fund work?

Investment funds can hold assets, like property or securities such as stocks, bonds, or other financial products of several companies in their portfolio.

Investment can also be created to raise money and lend it to borrower, just like a bank.

So, when you decide to invest in a fund, you are not investing directly into the asset itself, but rather into the investment fund who then uses the money within the fund to invest it in accordance with the investment strategy to increase the returns to the members of the fund over time.

Who handles the fund?

The entity established to run the fund is known as a Fund Manager who oversees the fund on the investors’ behalf.

Their job includes: 

• Looking for investors, 
• Building a team, 
• Creating and implementing the fund’s strategy, 
• Managing its operation, and 
• Trading

The most critical of all is operating the fund in accordance with the investment strategy.

The fund managers will charge a fixed fee or a small percentage of the overall investment for the service they deliver to the members. 

What are the different types of funds?

There are different types of funds, and the fund managers. Some popular investment fund types that you might have heard are:

• Mutual Funds (MF)
• Exchange Traded funds (ETFs)
• Private Equity Funds (PE)
• Venture Capital Fund (VC)
• Real Estate Funds (REIT)
• Hedge Funds (HF)
• Fund of Funds (FoF)

These types are simplified for your easy understanding below.

• Mutual Funds (MF) is a managed fund or managed portfolio. Investor money is pooled. A managed fund focuses on buying or selling asset class, such as Australian shares or bonds. The value of the units will rise and fall with the underlying asset value. Some managed funds also pay income or ‘distributions’ along the way to the investor.

• Exchange-Traded Funds (EFT’s) is a managed fund that buys or sells on an exchange, like the Australian Securities Exchange (ASX). ETFs are mostly passive investments in Australia, and they don’t try to outperform the market. The role of the fund manager is to track the value of an index like the ASX200 or S&P500 or a specific commodity, such as gold. ETF values can go up or down with the index or asset they’re tracking.
• Private Equity Funds (PE) firms manage investments in private companies. They may invest their own capital, raise funds from external investors to invest on their behalf, or do both. For example, most private equity funds have a fixed term of 10 years. However, they might get an extension of two or three years, after which the fund is closed by having all funds distributed back to investors.

• Venture Capital (VC) funds are pooled investment funds that manage the money of investors who seek private equity stakes in startups and small- to medium-sized enterprises with strong growth potential. Typically, private equity capital is used to invest in generally new, innovative or fast-growing companies. These investments are in high-risk, high-return opportunities in unlisted companies or situations.

• Real Estate Investment Fund (REIT) are a type of mutual fund that primarily focuses on investing in securities offered by public real estate companies. Real estate investment trusts, provide investors exposure to the property market. Like managed funds, REITs are actively managed and pool together investors’ money to invest in properties. Typically, they invest in commercial properties such as offices and apartment buildings, shopping centers and hotels. 

• Hedge Funds (HF) use pooled funds to invest in alternative assets or strategies. Investment can include the use of derivatives, alternative investments, or leverage in domestic and international markets.

• A Fund of Funds (FoF), also known as a multi-manager investment, is a pooled investment fund that invests in other funds and not directly in securities or assets.

Want to start an investment fund?

Starting an investment fund is an amazing way to build wealth.

That why many of the elite and wealthiest people run funds in the world.

A fund can be very lucrative if done correctly.

Well managed fund should focus on the investor returns first.

The more money you make of the investor, the more money you will make for yourself as the fund manager.

If you want to start a fund, reach out to me via my social channels

Simply, don’t be afraid to start

Do you want to Create, Launch & Scale an Investment Fund? Book a FREE session, and let’s devise the perfect game plan for you!

Here is to your fund success!

Dolly Brtan

Access free training @The Investment Fund Project Facebook group!

DISCLAIMER:  – All written content on this site is for educational and information purposes only. Opinions expressed herein are solely those of the author, unless otherwise specifically cited. All statements reflect the author’s judgment as of the publication date and are subject to change. The information contained herein does not include personalized investment advice, nor should it be construed as investment, legal, or tax advice. All ideas and information provided should be discussed with a professional advisor, certified accountant, or practicing lawyer before implementation. The ideas and information presented here is also not an offer to buy or sell securities nor a solicitation of any offers to buy or sell the securities mentioned herein.