In this part, we introduce different fund types. For beginning investors, this is a good place to start.
Investment funds come in many flavors which will be detailed here. But first, why would millions of investors invest hundreds of billions of dollars into these vehicles? The reasons are quite valid. First, investment funds offer management expertise and resources which inexperienced investors lack. Investment funds are run by seasoned professionals who have plenty of staff to support the operations and research. Second, they offer the benefits of diversification.
While it would be difficult and expensive for an average investor to buy and oversee tens or hundreds of different positions, the professional investment company can do these quite easily as the funds come from many investors and the costs are split among the accounts. Third, there’s a wide selection. As there are many investment styles and various asset classes, the investors can easily invest in various funds with small amounts of money.
The clear benefits are professional management and diversification- all that at a relatively low cost, and done in a way that’s convenient to investors.
What are the drawbacks? First, the fees, spreads, and commissions. Second, many active managers don’t beat the market, but there are ways to overcome this with index investing.
In this section you will learn about different investment funds such as mutual funds, index funds, ETFs, hedge funds, REITs, and other investments. Here, we provide a very comprehensive coverage about these investment vehicles.
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