Definition: What is an Investment Fund?
Investment funds are a special type of financial instrument for which shares can be bought or sold, just like stocks.
An investment manager(s) manages the fund, and gathers capital from investors. The accumulated capital is then invested in a wide range of different securities.
Shares in investment funds may be sold in a publicly traded market or within a privately held structure.
What are the Advantages of Investment Funds?
Investment funds are normally recommended for individuals that have a low amount of investable capital or for individuals with limited investing experience.
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By investing in such a fund, an investor can have financial experts manage their money rather than doing it themselves.
Since most funds invests in a wide assortment of securities, the systemic risk that comes with investing is reduced.
Disadvantages
While investment funds are professionally managed and provide people with minimal capital an opportunity to invest, they are still vulnerable to market volatility.
Furthermore, they do not provide investors an opportunity to influence the fund’s decisions and investments.
Types of Investment Funds
There are several types of investment funds, including mutual funds, exchange-traded funds and hedge funds.
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