Types of investment funds

investment funds

Investment funds are a method used to provide funds for a group of investors by holding their securities. Each investor maintains ownership of his securities, and the investment fund contributes to providing a group of diverse investment opportunities.

Investment funds are also known as a pool of money shared in ownership by a group of investors, and are managed by specialists in the field of financial investment, who make decisions to buy or sell a group of securities, such as bonds and stocks, which contributes to the diversification of private ownership in each shareholder. Investment Fund.

Another definition of investment funds is that they are a means of collecting the money of individual investors, companies, and various establishments, and then contracting with a manager or financial expert to manage the contents of the investment funds. The goal of this is to provide the highest financial returns with the least possible risk.

Types of investment funds

There are a group of special types of investment funds, each type has a role in the stock market, and the following is information about them:

Stock Funds: They are funds that rely on trading investments in general, away from any ownership of companies within the private sector. These investment funds are considered the most volatile and variable. Its value continues to rise and fall over a short period of time. Historically, the performance of equity funds is considered the best among other types of investment 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 investors’ rights in them.
Fixed income funds: They are investment funds, also called bond funds, that 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 investor’s financial returns. By providing him with a fixed income when stock funds lose their value in the financial market.
Money market funds: They are funds with a low risk rate compared to other investment funds. These funds are limited to high-quality investments, which are often short-term and issued by the government or local companies.
Balanced funds: They are funds that aim to provide a balanced mixture of security (low risk), capital, and income. Balanced investment funds depend on applying an investment strategy in stocks and fixed income. A typical balanced fund contains 60% of stocks and 40% of fixed income, but it is possible to achieve balance at the maximum or minimum value of assets.
International Funds: They are investment funds, also known as global funds or foreign funds, and are often used by investors who invest their money outside their countries of origin. These funds depend on applying investments in all parts of the world, and they often suffer from difficulty in classifying their funds. It is possible that their risk increases or their safety rate increases more than 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 they contain more than one category of securities, most of which are considered popular, but these funds dispense with diversification in categories within the economic sector, but rather target funds belonging to specific economic sectors, such as health, money, and technology, which are more likely to achieve profits. Among the types of these funds are:
- Regional funds: These are 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 easily used in investments that depend on purchasing foreign stocks.
- Social funds: Also known as ethical funds, they depend on investing in companies that achieve specific investment standards linked to ethics. Do not invest money in weapons or alcohol companies.
Index boxes: They are funds that are interested in investing in number indices, and include the results of stocks in the financial markets. Index funds are characterized by being low-risk.

Advantages of investment funds

Investment funds are one of the most popular investment options among people. Because it provides many features, the most important of which are:

Investment fund risks

Investment funds are affected by a group of risks, and are distributed according to the following categories:

Low-risk mutual funds: They are funds that are characterized by their low risk and are characterized by the following characteristics:
- Low level of risk; Because investors are interested in reducing risk in order to avoid negative results resulting from the short-term investment.
- Stay away from all fluctuations in investment prices to ensure that all investments remain safe.
- Achieving relatively small profits; Due to the low risk ratio adopted in these funds.
- Investors' constant need to obtain financial liquidity.
Medium risk mutual funds: They are funds with relatively moderate risks, and are characterized by the following characteristics:
- The ability to bear various changes in prices, while accepting the idea of financial losses in capital.
- The need for liquidity is approximately moderate.
High-risk mutual funds: These funds are based on the following characteristics:
- Investors in these funds have extensive experience in the financial markets.
- The need for financial liquidity is very low.