What is a mutual fund?

Business | February 28, 2013 | Comments 0
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A mutual fund is a financial mechanism in which a sum of contributions of money, delivered both by an individual as a legal entity, are received by a corporation or financial, who invests in various types of financial instruments, which are goods or publicly offered securities. The main objective is to make a profit, which will be shared among all those who made contributions of money.

While investing in mutual funds is a form of savings, it differs because it does not have a guaranteed profit. This was due to the investments made by mutual funds could not generate the expected profits and may even lose a certain amount of investment, and in some cases, lose everything. This in exchange for the possibility of greater profits to which we can get our money investing in bonds, which offer much less attractive interests.

The situation just described makes this practice is regulated by law, clearly indicating that this is an investment “own risk”. In addition, entities that are responsible for providing and making investments always use the following sentence: “The last performance is by mutual funds managed by the company, not guarantee them from occurring in the future.”

As we see, is of utmost importance when deciding whether to invest in mutual funds, clearly know what they are investing our money, Ali also know the capabilities of management of the entity that administers the funds, and that, in general, that depends how much risk you run and how much profit is obtained.

There are various types of mutual funds, with a different mix, portfolio or investment portfolio, which may include securities such as stocks, money (investments in foreign or local currency), andgoods (eg, mortgage). Important words and simple is the fee that is not more than the value of the assets of the investment divided into parts for each investor (remember that these are also called CRF funds or mutual funds, for participation several investors), this fee is contained in the monthly reports sent to us by financial institutions responsible for managing our funds.

A good example is that investment, in case you want to make a contribution to invest in shares of Chile, then, it is best to invest in a fund that is oriented to the market in that country, in an entity that has a management capacity of excellent reputation, and that like any investment entity, it oversees the Superintendency of Securities and Insurance (SVS)

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