What different types of funds are available?
- Equity funds invest money in shares. They often focus on particular sectors, regions or countries. Equity funds entail slightly higher risk than other types of funds but can also generate better returns.
- Bond funds invest primarily in corporate and government bonds. There are also bonds for more cautious investors as well as those wishing to assume more risk. However, bonds with a good rating are particularly well suited to more careful investors.
- Asset allocation funds invest in shares and bonds which are sometimes supplemented with commodities and real estate. Investment in different investment classes spreads the risk even more widely.
- Real estate funds invest in real estate companies, housing developments, other real estate funds or plots of land. This means investors can gain a foothold in the real estate market even with small amounts of money.
- Hedge funds invest in an even wider array of specialized investment products and sometimes carry out short sales which can generate profit even when prices are falling. When investing in hedge funds it is vitally important to understand what the fund manager’s investment strategy is and what fees are charged. Investors then have to decide for themselves whether this will enable them to achieve positive performance.