Investing in an investment fund is investing indirectly: unlike direct investments through which you freely invest your money in companies, or projects you would like to financially support but require a certain amount of prior knowledge.
An investment fund is simply a big portfolio, funded by investors like you and I, and managed by a professional (banker or asset manager).
I can already hear your next question! “But tell me something Noé, why would I invest my hard-earned money in some sort of anonymous common pot that will purchase securities with a tongue-twisting name I know nothing about?”.
Okay, put like this, I understand where you are coming from and why you might be sceptical. Let’s move on to the next chapter!
Why invest in an investment fund?
Instead of complicating your life by tracking down attractive shares, bonds, or even real estate properties, why not use the services of an expert in the field? This asset management professional will gather many individual investments in order to build the said “common pot” and be able to invest this money in a much more efficient way by benefiting from economies of scale. If we all invest on our own, the profit will necessarily be smaller than if get all our assets together, right?
If you have assets on a dormant account, or even if you want to save money each month, wouldn’t it be really nice for:
- This money to gain value without requiring you to do anything?
- This money to allow you to financially support causes that are close to your hear?
An investment fund is managed by an investment specialist
If the investment fund is headed by a banker or an asset manager, it is in good hands.
And even if your trust in any form of economist, banker or asset manager was frazzled by your memories of the previous crisis and subsequent Hollywood movies, keep in mind that risk minimisation is structural. It does not even depend on an individual.
An investment fund allows for greater diversification
The first rule of investment is (it’s ok, we can talk about it, this not Fight Club) not to put all your eggs in one basket.
Imagine investing 20,000 CHF. To diversify your securities, you will want to purchase various shares, some bonds, a couple real estate shares in different regions. A meticulous task and the insurance of an everlasting headache.
Now put the same amount in an investment fund: since the total value of the fund is vastly superior to your contribution, it is easy for an asset manager to divide the total amount and diversify the portfolio.
Well, that being said, he will continue to crunch numbers in a way that would have given a headache to anyone but him. But that is now his problem and no longer yours.
An investment fund protects your investment
This protection is due to two important factors:
- When you invest in an investment fund, a manager takes care of your assets. Because he is an expert, not only can he find you the best investments, but he can also predict whether big disasters are likely to happen. In which case, he or she will know how to act accordingly and do damage control.
- Swiss banks offer guarantees for up to 100,000 CHF in case any account goes bankrupt.
An investment fund allows you to support a cause that is close to your heart
The more time passes, the more investment funds are being created. Among those are thematical funds, which focus on a specific topic:
- Renewable energies;
It is therefore possible to invest your savings in specific fields and, thereby, support industries you care about without having to go through too much trouble to find each company you are interested in by yourself.
Furthermore, it is also possible to find investment funds that invest in various fields, and/or different geographical regions, while keeping ecological and responsible standards as a guideline.