They are one of the star products in the investment world. Last year was undoubtedly one of the best years for the funds in Spain. The association of collective investment institutions, Inverco, notified these products, the highest amount in more than five years.
The good returns of the markets, in addition, boosted assets under management to 316,084 million, 15.1% more than the previous year, according to provisional data. Investing in a fund, like other processes in life, requires prior knowledge and learning.
An investment fund is a collective investment product (CII). It brings together the contributions of the participants (people) to invest their savings. The sum of all these capital contributions goes to a larger fund, created to diversify that capital between different assets: fixed income, variable income…
The objective of this investment vehicle is to achieve the best possible conditions. Those impossible to collect in an investment on their own. One of its strengths is security, since management falls to professionals. Not to mention that the funds are supervised by official bodies, such as market regulators. The National Securities Market Commission (CNMV) ensures that the transparency, liquidity and diversification factors required by regulation are met.
Youtube Video
Basic concepts
There are many types of funds. But to understand them well you have to know the ‘abc’ of characteristics or parts that compose them. In the first place, as mentioned before, there are the fund’s participants, the people who invest their money, through contributions, with the aim of obtaining a return on that capital.
The management company is the main element of trust, since the managers, professionals who invest the fund’s capital, work under its name. That is why a fund does not have a legal personality, but rather a “management company”. This manages the fund, but is not the owner. The owners are all the participants in the fund.
A third actor is the depositary entity, in charge of guarding and monitoring the heritage (securities and financial assets). It has some control over the management company and a different nature, and may be, for example, a savings bank.
Then there are the “automatisms” of the investors. The purchase of shares in a fund is called a subscription. The opposite, the sale of shares, is a refund. And the net asset value is the value of that share in the market, which is calculated as the division between the total assets of the fund and the number of shares of an investor.
Just as a fund always seeks a return over a period of time (the investment period), this ‘prize’ for the investor cannot be understood without its nemesis: commissions. The most common in a fund are management, subscription and redemption, deposit or success. And, indeed, they are the number 1 enemy of fund investors.
But not everything is bad news and commissions. Investment funds have a tax advantage: transferring funds (moving money from one fund to another) is tax-free. The only condition to get rid of the tax toll is that the fund of origin and destination are community and are registered with the CNMV.
The Finect website has the most varied investment fund showcases, from , or , to investment in funds by geography, such as or s. Also from the web you can at the same time.
Functioning of a fund
Once the parts and protagonists of this type of investment vehicle have been clarified, it remains to be seen how it works. This is how a fund works from the investor’s point of view:
1. The investor chooses the fund or that helps him choose the most suitable one. Some of the basic questions to opt for one or the other are: what risk profile does the fund have? What investment policy does it follow? What is its historical profitability? What commissions do you charge and how much?
2. The price of a fund’s shares is obtained by dividing the fund’s assets among the participants
3. Any investor can buy or sell their shares at any time. That is, subscribe or redeem.
4. The change of funds is called a transfer, and as we mentioned before, it is exempt from paying taxes.
5. In addition, the investor is only taxed when the shares are reimbursed and he obtains a profit.
Facebook Comments
Disqus