An introductory overview of investment funds

The idea of investment funds began about a century ago in the Netherlands, before spreading to several European capitals, before the United States issued a special decree regulating their operation in the middle of the last century.

Investment funds are one of the participatory investment tools of a special nature. They allow investors to contribute their savings to the investment fund in exchange for purchasing units within it. The fund's management invests these amounts within one of the types of investments, and they must develop appropriate strategies for the success of the investment, deal with risks, report on the fund's activity and performance, and distribute profits to the fund's participants periodically.

These funds are characterized by the diversity of their investments, the expertise of their administrators, and the government regulation of their work, which ensures the safety of the capital of the fund's participants.

Shareholders in an investment fund do not have direct control over the funds' assets, even if they own a stake in it. Rather, they receive a share of the profits or bear a portion of the losses to the extent of their shares in the fund.

An introductory overview of individual stocks

Individual shares are those limited shares that an investor buys in a joint stock company listed on the stock exchange, where the investor is a partner in this company with a share equal to the number of his shares.

Companies distribute their profits to shareholders periodically, and share prices may increase or decrease in value depending on the company's performance, and the investor can sell his shares on the stock exchange at any time he wants.

What are the main differences between mutual funds and individual stocks?

The two previous forms of investment are similar in many ways and different in others, for example:

Diversification vs. Concentration

Mutual funds are characterized by the diversification of their investment assets, thanks to their often large capital, which allows them to make several trades or buy assets in more than one company at the same time, thus enhancing the growth opportunities of the investment portfolio and reducing potential risks.

Investing in individual stocks, on the other hand, will often be in a limited number of companies, which means limited opportunities and increased risk.

Professional management vs. self-management

It characterizes investment funds and earns them the position of reliability among investors: The fund's management team can guide the investment and achieve the best profits, as the fund's management fully manages the investment on behalf of the investors, and the fund manager is responsible for developing thoughtful strategies for his fund's business plan and distancing it from potential risks thanks to his experience.

On the other hand, individual investing is up to the investor's experience and ability to deal with constant market fluctuations, analyze markets, and study performance. From this perspective, mutual funds can be safer.

Costs and fees

An investment fund typically charges its participants a range of expenses and costs for operational and administrative procedures, and fees for opening and closing trades, which are charged to capital.

Unlike in individual investing, investing in stocks individually may only incur brokerage costs when buying and selling stocks.

Performance and returns

Financial returns are not strictly comparable between investing individually in stocks and investing in funds, but in general, funds tend to have stable returns due to their diversified assets, while individual investing is more volatile, which means that individual investing is constantly disrupted.

Advantages and Disadvantages of Mutual Funds

One of the most popular features of investing in mutual funds:

1. The professional management of capital that funds provide.
2. Diversification of investment assets within a wide range of assets.
3. Lower investment risk than direct investment.
4. Provide a good opportunity for small investors to invest in them.
5. Provide a stable and often invested income, with the opportunity for capital growth.

But one of its disadvantages is worth mentioning:

1. Lack of direct investor control over the capital and direction of the investment.
2. Administrative fees and additional costs are charged to investors.

Advantages and disadvantages of individual stocks

On the other hand, direct individual investment in the stock markets has its advantages and disadvantages, the most important of which are:

1. Full control over your capital and the ability to buy and sell shares.
2. Asset diversification can be done with your own strategy, as well as investment consolidation, or withdrawing part of the profits with ease.
3. The ability to achieve high financial returns, and in some cases faster in some cases, when the investment is successful.

The disadvantages of investing individually in stocks include:

1. It is necessary to have a high ability to manage investments, read the market, and develop effective strategies, with a mature vision for risk management.
2. Also, the risks in individual investment are higher than investing in funds with specialized management.
3. Lack of liquidity or difficulty in deciding to liquidate capital in the event of a decline in stock prices, which means a real loss of capital.
4. These investments do not provide stable and continuous income.
5. As well as the lack of guarantee of investment profit, with the uncertainty of losing part of the capital.

When should you invest in mutual funds or individual stocks?

In delicate investments that require specialization and expertise in their field, it is important for the investor to understand the nature of the investment and its risks, and to know the nuances of investing in stocks while dealing with real-time market developments to achieve the best possible income.

As for those who lack sufficient experience or dedication to manage their investment, or are new to the field of investing in stocks, investment funds will provide them with an important investment option that satisfies their aspirations, with professional management capable of maintaining and growing their capital.

On the other hand, for small investors who do not have enough capital to enter many transactions at the same time, mutual funds allow them to invest in highly diversified investment portfolios, just like other large investors contributing to the fund's portfolio, but in proportion to their shares and contributions.

4. For everything related to Turkish investment funds, consult the experts of Oragon Company

Investing in mutual funds is certainly today considered one of the encouraging areas for many ambitious investors who want to grow their wealth and reap easy profits that do not require direct management of these investments, but the nature of these funds, their working mechanism, and the way to participate in them and share their profits or benefit from their laws may raise many questions and inquiries about the investment mechanism, risks, strategies, profit opportunities, and loss possibilities, in addition to the advantages and incentives offered by the funds or the Turkish state to investors, such as obtaining Turkish citizenship in exchange for investing $500,000.

Therefore, we invite everyone interested in this type of investment to communicate directly with our team of skilled consultants in the field of investment fund management, where you can find through these free consultations the answers to all your questions, with the opportunity to learn about our ambitious investment funds and our multiple options within the safest investment areas, such as real estate funds, in addition to learning about our other services in this important field.

Edited by Oragon Company ©