FAQ: What are Investment Funds?

Everyone is looking for a way to take the money they have and make it turn into more. Whether that growth comes from business ventures or investment instruments, the ultimate goal is to take what you have got and make it turn a profit. That is the basic strategy behind all investments – money is put into some type of speculation with the ultimate goal of turning a profit. An investment fund, in the financial world, is an organization where money is contributed for some special purpose. Put them both together and you get an investment fund.

Access to Expensive Securities

Investment funds are a type of investment instrument where the financial resources of many are pooled together for the purpose of turning a profit. When small amounts of money from many investors are pulled together, they get the power of being able to invest in areas that may normally be out of their price range normally. Those participating in investment funds will typically have vested interests in securities and properties that would not otherwise be obtainable to them if they were to try to purchase as an individual stockholder.

Related: Everything You Need To Know About Hedge Funds

Save Money

Building Wealth

Another benefit to investment funds is that it can actually save investors money. With investment funds, investors will not be bogged down by high trading costs as investment companies commonly get some type of “bulk discount” for their transactions.

Mutual Funds

Mutual funds are one of the most common types of investment funds and are also known as a “collective investment scheme.” Investment funds in the form of mutual funds are typically made up of stocks, bonds, short-term money market instruments and other securities. Outside of the United States, the term investment funds is commonly used to replaced mutual funds in a sentence. In America however, investment funds can also stand for unit investment trusts (UITs) and closed-end funds.

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GOBankingRates Staff

These articles are written by the in-house GOBankingRates team.

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