Investment Funds

An investment fund is basically a vehicle for pooling small amounts of money into one basket and then invest the accumulated capital into other financial instruments.

Often investment funds offer savings plans. This means that for small and regular payments units (= approx. shares) of the investment funds are bought. Usually it is also possible to purchase fractions of units so that the regular payment can still be fully invested.

Investment Funds can be a good fit for people who prefer to not having to deal with selecting individual investments. Gathering information, assessing investment opportunities, and then making a decision can be time consuming. By selecting a funds an investor can avoid this activity to a large degree.

On the other hand all investment funds have an investment focus. There are funds that use geographic criteria to select investments, e.g. a fund might be specialized in South American companies. Some funds use other criteria to invest, e.g. investing in specific industries such as commodities or real estate.

Hedge Funds

Hedge funds are yet another type of investment funds. As they are typically unlimited in terms of what they can buy they may also buy options and futures, which in turn have a substantially higher risk profile than other financial instruments.

Therefore in some jurisdictions hedge funds might not be accessible to the average individual investor at all, and even if hedge funds are available the entry barrier might be high in terms of the minimum amount that you have to invest. In addition once the money is in the hedge funds you may not be able to get it out of it unless you find someone who buys your fund units.