It is known that investment funds, in all their various specializations, are investment tools for the development of wealth and savings, and these funds have their advantages and disadvantages, like other investment tools, which we will discuss in the course of this article, indicating the most important differences between investment funds and other investments outside the circle of funds.

The difference between mutual funds and stocks

Mutual funds are entities that collect money from investors and invest it in a particular investment sector. Mutual funds can work in the field of stocks, as can any individual investor in this field, but there are several fundamental differences between the two cases, including the following:

• In the equity sector, the investor manages his investments, and the investor is responsible for selecting and managing the stocks himself, which requires him to have sufficient knowledge and experience in the field of investing in stocks. In an equity fund, the fund's experienced and knowledgeable management is responsible for managing the investment at all stages.
• Mutual funds have certain expenses and transaction fees, while an investor who manages their capital in stocks will bypass these costs.
• Mutual funds offer the opportunity for greater stock diversification within a portfolio, as investments are spread across many assets, reducing risk. This may not be available to small, mid-cap investors.
• As a result, individuals investing in stocks have a higher risk profile than those investing in stock funds.

The difference between mutual funds and bonds

The idea of investing in bonds is based on the principle of buying government or corporate bonds and capitalizing on the interest that accrues on the repayment date. Some of the key differences between investing directly in bonds and investing through bond funds are:

• Bond funds offer greater portfolio diversification, as investments are spread across many bonds issued by different entities, rather than just a few bonds, which reduces the risk to the fund's overall investment portfolio, a very important feature in the notoriously high-risk bond sector.
• Bond funds charge a management fee on trades in addition to other expenses, which reduces the investor's overall return, which the investor would not incur on their own.
• Bond funds are managed by financial experts, providing investors with the opportunity to benefit from their expertise in bond selection and timing, something an individual investor may lack in their direct investment, as these tasks are on their shoulders, and the benefit of the investment is dependent on their own experience.
• Investors can easily buy units of the fund and can liquidate their shares of the fund at will, while a bond investor is bound by what he has committed himself to, and cannot easily sell the bonds in the secondary market, especially if the bonds are issued by small or little-known companies.
• Bond funds give investors access to a wide range of bonds that they may not have access to individually.

The difference between mutual funds and real estate

The topic of investing in REITs is similar to direct real estate investment, although the investment tools differ, the differences between the two cases are almost fundamental to some extent, with their advantages and disadvantages, which we mention:

• Tax exemptions granted by the Turkish government for two years on the capital invested in real estate funds, a benefit that is not available in the case of direct real estate investment.
• Real estate funds are typically managed by a team of financial and real estate experts, allowing real estate fund investors to manage their assets with a high level of expertise that may not be available to individual investors.
• Diversification of real estate assets in funds is an investment objective that may not be achievable in the case of individual real estate investment, given the large size of the fund's capital.
• Many real estate funds offer fixed income from the real estate assets they own with regular cash flow, such as hotels, resorts, and commercial or industrial centers.
• In the case of direct real estate investment, the investor can use the property as their own home until it is resold or rented out, while in the case of investment in real estate funds with participatory status, this is not possible.
• Direct real estate investment is costly and requires sufficient capital to do the job while investing in real estate funds is affordable and accessible to many.

The difference between investment funds and direct investment in projects

Venture capital funds, also known as venture capital funds, is a type of fund that focuses on investing in startups or small companies whose projects are expected to grow rapidly, as these funds aim to achieve high financial returns in the long term, by helping these companies grow and expand.

One of the most important differences between investing in this type of fund and investing directly in the industry:

• Fund management is responsible for selecting and studying successful projects, while in the case of direct investment, the investor is responsible for this task.
• Thus, the risk at this stage is higher than in direct investment, especially since it is difficult to diversify investments, as it requires large capital, while this is more available in large-capitalization investment funds.
• In investment funds, you can monetize your stake in the fund and sell the owned units at will, while it may not be as easy in the case of direct investment.

How to choose the right type of investment?

Choosing the right investment depends on some things:

1. In the case of direct investment, you may not invest in what you do not master the investment tools, otherwise, the possibility of loss will be closer to you than the possibility of profit. In the case of indirect investment, such as mutual funds, expert fund management will be entrusted with this task, but this does not negate the need to learn about what you want to invest in and try to increase your education about your chosen investment topic.
2. Define your long-term, short- and medium-term investment goals and draw a clear and logical outline of your expected investment returns.
3. You need to determine your tolerance for risk and loss and choose an investment that suits your preferences.
4. Diversifying investments into many projects rather than a single one gives capital a lifeline from the devastating losses that startups, for example, often suffer. Accordingly, investment funds can offer more diversification opportunities than individual investments.
5. Consult with investment experts who are knowledgeable in your chosen investment sectors, and act on their guidance and advice.

For all things related to investment funds in Turkey, consult Oragon

Oragon is one of the most important companies specializing in licensing and managing investment funds in Turkey, which, thanks to its expert management team and its ambitious investment funds, has been able to move steadily towards its investment goals, committed to safe investment rules with risk management, and supported by full transparency in the management of those funds, by providing periodic financial reports and clear investment strategies, to enhance confidence between us and our investor partners, as we strive to seize investment opportunities that generate more profits for our investment portfolios.

Oragon provides all those interested in its investment activity with the most complete information, advice, and consultations, whether by communicating through our various contacts, or by visiting our premises.

Edited by Oragon Company ©