Investment fund
Not all individuals possess the expertise of financiers or stock market professionals, yet everyone has the potential to become a great investor. Such a principle forms the operational foundation of investment funds, facilitating investors to allocate their focus to personal or professional pursuits while entrusting the management of assets to the funds. Dating back to the 18th century, the inception of the world's first investment fund's objective was to diversify investors' risks. Subsequently, various types of investment funds have emerged to cater to the diverse needs and preferences of investors, offering distinct levels of risk and potential returns.
Fist mutual fund in 1924
The concept of mitigating risk through the consolidation of funds from numerous investors into a single fund was initially conceived in England in 1868. However, the inception of the contemporary mutual fund occurred in 1924 in the United States. The fund is now called MFS Investment Management and has become open to the investing public in 1928.
First private fund in 1946
Following the World War II in 1946, the two venture capital firms, American Research and Development Corporation and J.H. Whitney & Company Foundations, were founded. This marked the beginning of contemporary private funds. These funds received strategic backing from the U.S. government, aimed at addressing the economic challenges prevalent in the aftermath of World War II.
Investment products
Equity
Equity investment is purchase of shares or ownership stakes in companies, often in the form of common stock or preferred stock. Equity investors acquire ownership in the company and become shareholders, entitling them to a portion of the company's profits in the form of dividends and potential capital appreciation as the company grows.
It is one of the primary asset classes in a diversified investment portfolio and offers potential for higher returns compared to fixed-income investments like bonds. However, equity investments also carry higher risk due to the volatility of stock prices and the uncertainty of future earnings.
Share prices may fluctuate based on company performance, market conditions, and economic conditions.
Bonds
Bond investments involve purchasing debt securities issued by governments, municipalities, corporations, or other entities. When an investor buys a bond, they are essentially lending money to the issuer in exchange for regular interest payments (known as coupon payments) and the return of the principal amount at maturity.
The risk profile varies according to bond type. Government bonds, particularly those from developed nations, tend to have lower risk, whereas corporate and emerging market bonds pose higher levels of risk. Bond prices are significantly impacted by factors such as interest rates, inflation, economic cycles, and the creditworthiness of the issuer.
Exchange-traded fund (ETF)
ETFs are investment funds that trade on stock exchanges, offering investors exposure to diversified portfolios of stocks, bonds, commodities, or other assets in a single security. ETFs are bought and sold throughout the trading day at market prices, providing liquidity and flexibility to investors. ETFs are typically passively managed, seeking to replicate the performance of a specific index or asset class, although some ETFs may be actively managed. With low expense ratios, tax efficiency, and transparency of holdings, ETFs have become popular investment vehicles for individual and institutional investors seeking diversified exposure to various markets and investment strategies.
The level of risk associated with an ETF is contingent upon its specific structure. Equity-based ETFs, resembling stocks, have a comparable degree of risk, whereas bond-based ETFs generally exhibit lower risk. Unconventional security ETFs, including those focused on commodities or emerging markets, may present distinct risk profiles.
Money market instruments
Money market instruments are short-term debt securities with high credit quality and low risk. They are often used by investors seeking safety and stability for their cash holdings while earning a modest return.
Money market instruments carry relatively low risk compared to other investments, but they are not entirely risk-free. Investors should carefully assess their risk tolerance, investment objectives, and time horizon before allocating capital to these securities.
Derivatives
Derivatives are financial instruments whose value is derived from the value of an underlying asset, index, or reference rate. Derivatives can be complex financial instruments that carry inherent risks, so they are not suitable for all investors. Investors considering buying derivatives should thoroughly understand the risks involved, have a clear investment objective, and consider consulting with a financial advisor or professional before engaging in derivatives trading.
Derivatives can involve complexity, and the use of leverage can amplify both profits and losses, leading to increased risk. The level of risk is contingent upon the derivative type, underlying asset, and prevailing market conditions. Engaging in such securities necessitates a thorough comprehension of the market dynamics and specific derivative contracts.
