Investors must invest in securities such as stocks and bonds. It is more difficult to manage ETFs, mutual funds.
Conducting trading operations in the form of the sale of shares through exchange-traded funds, the use of a single process occurs. In any case, the investor will respond by pooling capital funds, you can sell jointly. The name of the process was collective investment. These are mutual funds, ETFs that have common characteristics with each other.
General properties of mutual funds, ETFs:
- Instruments for investment are mutual funds, ETFs, which are designated in cash. Use stock assets managed by the firm. Depositories supervise the work. Auditors take part, the conditions are regulated at the legislative level. The movement of stock activity is checked by the main Central Bank.
- Funds have a certain “entry threshold”, called the minimum investment amount, offered to the investor. This is a small price for a beginner. Any person has the right to use this threshold. A beginner in business to cope.
- A stock portfolio is being formed for the investor. This is the diversification of securities to reduce the occurrence of risks, obtain stability and profitability.
- A mutual fund is understood as a mutual fund. This is a kind of investment form of collective appeal. Investors – owners of property shares participate here, management is carried out depending on the share amount. There is a regulation of activities through professional participation in the work of the market, carrying out transactions with securities. The action is performed by the leading firm.
- Shareholders entrust the operation of the firm to control and manage finances. Shares, bonds are bought. You can sell securities, make foreign currency deposits, work with real estate is allowed.
- Investors’ profits will be distributed according to the share volume of each, compared with stock shares.
- A type of security – a share is called a nominal form certifying the right of ownership. Provided for the owner of the property fund.
Types of division of mutual funds, basic principles of share redemption:
- View of an open share. Provides for company management, sale, purchase, a known type of contribution. Designed for beginners and creates a profitable environment for investing money in the fund, money is taken at any time.
- Interval type. Consent with the investor is obtained for work. Conditions are negotiated, stocks and bonds are chosen for investment. These are shares and transactions related to the exchange purchase and sale. They pass at the appointed time. The number can be indicated 4 times annually.
- A closed form provides a way for the participant to exit. The investor may withdraw from the structure before the expiration of the mutual fund. Usually created for real estate investment use.
The positive aspects of mutual funds are the professional processing of financial market relations, legislative regulation, and control over management activities. When purchasing units, the value is included in the amount that goes through the process of portfolio diversification. High level guaranteed.
Then investors of mutual funds have tax advantages. Pay income tax in a stock exit situation.
The management company takes payment – remuneration for work. It can be of 3 types, which include premium amounts when investors purchase a stock unit, not more than 1.5%, the second type includes a discount during a sale operation of not more than 3% of the unit price. The percentage of the net asset price annually is in the range from 0.5% to 5%.
When investing money in a mutual fund, they first read information about the stock market, companies, look at reviews. The management company has many mutual funds, the yield of which varies. There are varying degrees of risk. Take into account the opinions “for”, “against” the method before making a contribution.
There is an Exchange method – Traded Fund, abbreviated as ETF. The word ETF is used to call the Exchange Traded Fund, which trades on the stock exchange. Works with shares, carries out trading operations. It differs from mutual funds in the way the main company is managed, which does not communicate directly with investors.
Buy shares on the stock exchange. Investors can always realize opportunities at the exchange’s current value. They also differ from mutual funds ETFs at the point of investment and withdrawal of funds immediately after the application. The mutual fund will not be able to respond quickly to the transaction. The expectation will be several days, the period may reach the end of the stock work period.
Exchange funds usually have an index character. This is a link to the active movement of the index, which means contribution to ETFs, but not to firms. This is an industry investment, market or state. Index peg excludes brokers from managing the fund. Significantly reduced investment costs. The expenses of the management company are indicated as a percentage depending on the volume of assets; there is a comparison with whole interest rates in mutual funds.
The company receives remuneration, which is included in the share price of exchange-traded funds. The person does not bear any additional expenses. The index for investment is selected. Then a fund is considered that charges a small fee.
You need to get acquainted with the information of the fund. It can work for several years on the market, that’s 4.5 years. The size must be kept meaningful. A huge selection of ETFs is available on the American exchanges. This is NYSE, NASDAQ. ETFs of foreign companies are bought on the Moscow Exchange, these are FinEX, ITI. There are no Russian variants of ETFs.
