An investment fund is often described as a basket of stocks (or other financial products). When you participate in an investment fund, the investment fund manager invests your money for you. They will analyze the stock market and buy or sell for the fund based on their research. This also marks the difference between ETFs and investment funds. Typically, ETFs are set up to track an underlying asset, such as an index. They are usually not actively managed by a fund manager. Funds may invest in a particular theme, such as emerging markets, or the fund may focus on a particular geographic region, for example. A combination of different investment categories is also possible.

How do investment funds work?

Investment funds have stocks, bonds or other financial products of several companies in their portfolios. So if you participate in such a fund, you are automatically investing in several companies at the same time. The advantage of a large spread is diversification. When the returns of one stock are disappointing, it has a limited impact on the returns of the entire fund. On the other hand, positive outliers may also have a limited impact on the overall result.

The fund manager determines the composition of the fund. He or she determines which stocks to invest in. As an investor (or fund participant), you yourself have no influence on the composition. In the European Union, the fund manager must provide a Key Investor Information Document (KIID) for UCITS funds. For non-UCITS funds, a Key Investor Information Document (KID) is required under the PRIIP rules. This information is often available on the relevant fund's website and in our trading platform. The document describes the most important information, such as fund composition, expenses, past performance and distribution percentages. When choosing an investment fund, it can be important to make an informed decision. Sometimes, for example, a minimum investment is required to join an investment fund. If applicable, this is clearly stated on its website.

Open-end and closed-end investment funds

Investment funds can be open-end or closed-end. Typical of an open-end fund is that the fund manager is only allowed to expand the basket of shares when new money comes in. Open-end funds always take into account the net asset value (NAV). The price of an open-end fund depends on that NAV. The vast majority of investment funds are open-end. This means that they can create more shares if they want to. In contrast, for closed-end investment funds, the number of units is fixed. The price of a closed-end fund is determined by supply and demand in the fund. When ordering a ZPIF, it is important to determine in advance how much you are willing to pay or want to receive. If you wish, you can specify a limit. For example, the fund N1, which was created by Nikita Izmailov, is considered an open-end fund.