Funds and shares: what they are and how to invest

An investment fund is a financial instrument that can be imagined as a sort of large basket in which to bring together the resources of small and large investors. The management of this basket is entrusted to a manager (investment company) who captures market trends by moving resources and obtaining profits for their savers.

When you invest in a fund, you buy a variety of assets such as stocks, real estate, government bonds and cash. And this is because the manager tends (following the golden rule of the investment markets of choosing the diversification of investments) to "bet" on varied products - often also belonging to competing markets - in such a way as to cushion the losses of a product with the profits of another.

Characteristics of an investment fund

Certainly among the best known investment funds we mention pension funds such as FSPS, widely used as a form of investment for the future. In fact, we remind you that there is no mandatory retirement age in the United Kingdom, and knowing the fundamental rules of investments can help you choose the best way to make your pension contributions pay off and make the most of them once you hang up your briefcase.

Opting for an investment fund avoids having to search and choose individual investments, entrusting the choice, management and monitoring to a specialized body - which is certainly recommended compared to improvising as a broker. Information that should not be forgotten is also that the British Government has provided for large types of investments worthy of exemption from taxation, this incentive has certainly made financial movements in the direction of investment funds more attractive.

The two main types of funds

• Active funds - Managed by professionals who choose which shares, bonds or other assets to hold and take care of monitoring the trend, an attitude that also allows you to change strategy at the right time. In these cases, the saver will pay a commission to the manager, who sells his expertise and experience. Usually, these funds are more profitable but require a long-term investment.

• Passive funds - They do not envisage the active involvement of the manager; they are savings placed on a given market and follow the index of that market (which however are normally less profitable).

Actions

Buying shares means buying a percentage ownership of a publicly traded company. Companies sell shares to raise funds and in doing so are able to create a market for their own securities. If the company performs well, the demand for its shares will increase, which will drive up the price. Conversely, if a company performs poorly, investors (shareholders) will tend to sell the stock as soon as possible (to avoid excessive loss), and the price will go down.

In the light of the various choices regarding the financial instruments that can be used for investing, it seems necessary to always rely on professionals in the sector, who will be able to direct the investor by listening to the needs, choices and objectives set. In fact, before anything else, you need to know what kind of goal you are pursuing when you start investing: economic growth or saving for rainy days?

Must know rules for investors

• An analysis of one's starting financial condition: for example, before thinking about a certain investment, one should opt for closing loans or debts in general;

• Definition of objectives: do you invest to have more or less immediate liquidity or to have a long-term income?

• Level of risk to be taken: the most unstable funds or shares are riskier and more profitable;

• Time: the longer you choose to freeze your savings, the higher your rate of return will be.

Once the key points have been clarified and a good investment plan has been developed with a trusted advisor, you can start investing.