Mutual Funds March 19

There are different types of funds. Equity funds invest money primarily in shares and therefore offer greater chances of profit than bond funds but also higher risks. Bond funds are based on fixed interest securities. Money market funds invest capital in securities with extremely short terms and are seen as an alternative to fixed term deposits. Property funds use at least 51 per cent of the money invested to buy property, such as land and heritable building rights. Mixed funds can consist of various elements, such as bonds and shares. This enables the fund manager to respond extremely flexibly to the respective market situation. A fund of funds invests in different individual funds. Investors can also participate in the commodity market by investing in commodity funds. There are also guarantee funds which guarantee either the repayment of the investment capital originally paid in ex agio or a defined percentage thereof at the end of a fixed term. Index funds are based on an index and reflect its development as exactly as possible.

A distinction is also drawn between open end and closed end funds. Shares in open end funds can be purchased at any time and can also be returned to the issuer. In contrast, closed end funds are shareholding investments with a limited term; the shares cannot be returned or increased further after the capital investment has been made.

Funds are established exclusively by investment companies, also known as capital investment companies. These are credit institutions which exist primarily to manage third-party assets in one or more funds; the management role must be performed by an independent custodian bank.

Among others, shares in a fund can be purchased from branch banks and direct banks. A custodian account is a necessary prerequisite. It is also possible to purchase funds directly on the stock exchange.

Data by Thomson Reuters