I invest all my money, and I do it mostly in mutual funds. In this article I will address the first doubts you may have about investment funds, from what they are to what types they exist, and I will tell you about the best existing investment funds, in which I invest my own money.
In addition, I will show you clearly that the funds of the banks in Spain are NOT a good option if you want to get the best profitability for your money. So you can see that I speak from experience, here you can check my entire investment portfolio.
What is an Investment Fund?
What are investment funds? An investment fund is a product that gathers the money of many investors to invest together in many companies at the same time. Normally, to invest your money you have to buy shares of a company.
An investment fund allows you, with a single investment, to invest in hundreds of companies around the world at the same time. In addition, to invest in an investment fund you do not need to be a rich investor, you can start from $ 1,000 or less.
The funds have a manager who decides which companies to invest in, always adapting to the type of fund that he manages and its rules.
Why do I Invest my Own Money in Funds?
As I told you, I invest a large part of my money in investment funds, and I do it for the following reasons:
Investment fund advantages
- I started with individual actions, but I have changed my mind over time because I don’t like to analyze companies.
- Investment funds allow me to invest my money in the stock market, my preferred form of investment, without complicating my life at all.
- With a single purchase I have shares in hundreds of companies, and a manager does all the work for me.
- I literally spend 5 minutes a month on my investments, and I don’t change that for anything.
- An investment fund gives you absolute diversification.
- You can make purchases of $ 100 per month, so your temporary diversification is amazing.
- You can access the whole world with a single fund, so geographic diversification is covered.
- And you can buy funds from any sector, so your diversification in assets is also perfect.
- With investment funds, you can have a very balanced portfolio and have your assets more than secure.
- By having a great diversification you minimize the risks of your investment.
The taxation of investment funds for a private investor in the US is fantastic. You can move the money between funds without going through the farm, without paying any taxes.
Moving money is transferring a fund. Buying and selling funds is something different. If you sell funds, if you have to pay taxes for the benefits.
The profitability of the funds depends a lot on the type of fund that is. I invest in equity funds, and the average annual return for the past 200 years is approximately 7%.
Therefore, in my investment strategy with funds I aspire to that 7% annually, something with which I would double my money every 10 years.
Investment funds have very low commissions. They have no sales commission or custody commission. The only commission, if you choose a good broker, is the annual management commission. Indexed or passive management funds have an annual commission of 0.3-0.5%, and active management funds of 1.5-2% per year.
Types of Investment Funds
To tell you what types of investment funds exist I will divide them into 3 different categories.
Types of Funds Depending on Which Assets they Invest in
Fixed income funds
Investing in fixed income consists of investing in deposits, bonds and treasury bills and other very low risk products. A fixed income fund is a very conservative fund, with which you can expect low returns and low volatility / risk.
Investing in equities is a synonym for investing in the stock market or in the stock market. An equity fund aims at maximum profitability, in exchange for short-term volatility.
Mixed income funds
A mixed income fund mixes equity and fixed income.
A monetary fund becomes practically a current account, it serves to have the money in liquidity and take advantage of the fiscal advantages of the funds to move money from one site to another. Most of my funds are equity, since if I invest my money it is to obtain long-term profitability, and I do not care about short-term volatility.
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