What is …? A fund?

What are funds exactly? We asked people on the street.

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Lots of people «have heard of them», but not many can explain exactly what funds are. They’re related in some way to financial investments and shares, there are lots of different types and you somehow pay money into them – lots of people pay into a pot of securities. The answers given by the people we spoke to in the street were almost right, but not quite. This is the correct answer:

A fund is actually a kind of pot into which lots of individual investors pay money. This creates what are known as fund assets. Depending on the type of fund, these are invested by the fund manager in shares, bonds, precious metals, commodities or other types of investment. As an investor, you therefore own part of this pot, or what are known as fund units. The value of these units depends on the securities in the pot. For example, if you have equity fund units, the price of the fund’s shares determines the value of your units. Funds provide you with a relatively easy way of diversifying your portfolio.

You can read more about funds and different fund types in the article «What different types of funds are available?»

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