Investment fund

Funds pool the assets of many investors and invest them in stocks, bonds, and other instruments, which enables investors to invest in a wide variety instruments with a small amount of money. Distributing risk among many different instruments reduces the overall risk for investors. Funds are the investment of choice for investors who do not want the burden of constantly monitoring their investments, and who prefer to leave the task of tracking and analysing the market to professionals.

A fund is managed by an investment company. The fund's assets are kept in custody at a depositary bank. Investors can buy or sell shares through the investment company itself or on the stock exchange. In most cases, the shares carry a load to cover marketing costs. Income in the form of dividends or interest is either paid out to the shareholder or reinvested.

The value of a share is calculated by dividing the fund's total assets by the number of outstanding shares. If the value of the investments held by the fund increases, the fund's total assets increase, and in turn, the value of the shares goes up.

Two categories of funds, retail funds and special funds, are each geared to a different group of investors. A further distinction is made between open-end and closed-end funds; a closed-end fund issues a fixed number of shares.