Investing in mutual funds

Georges Bock
Table of contents
Georges Bock

Want to invest but unsure where to put your money?

You find crypto cool but too risky. Stocks seem time-consuming and complicated. And real estate—great, but where to find the deposit?

If you relate to one or all these feelings, then investment funds might be for you. They come in all shapes and sizes, cater for different risk profiles, and even for more sustainability-conscious investors.

Here’s our definitive guide to investments funds, their perks, their faults, and how you can make them work for you.

Lesson 1 on what a fund is?

By investing in a mutual fund, you’re pooling together your cash with other investors to buy bonds, stocks, and other securities.

This is done via a company that makes these investments on behalf of all the investors: a mutual fund. It’s often called a “collective investment” because people come together to invest, rather than choosing on their own.

You don’t directly own the investments, the mutual fund does, but you get a share of the profits or losses of the funds’ future holdings.

Most funds are based on a theme, for example, North American markets, technology, or government bonds. The theme often determines whether the fund is high- or -low- risk so it’s good to get an understanding of how they work.

Lesson 2 on why people invest in funds

Investment funds can make investing that bit easier.

It’s a good place to start if you’re worried about things like risk, selecting the wrong stocks or getting your money back in an emergency.

Funds also compare well to other options if you wish to concentrate on an entire industry, geography or cause rather than to individual companies.

Six common investing struggles that funds make easier

Selecting stocks and bonds

With funds, a professional at the fund house chooses the stocks or securities for you so you don’t need to worry about following the market or buying and selling at the right or wrong time.
This helps take the stress out of investing so you can easily pursue long-term strategies for growth over longer timescales.

‍Getting a clear idea of risk

‍Unlike stocks or cryptocurrencies, each fund is given a financial risk score, so you have a a really good idea of what you’re getting yourself into if you buy.

It’s relatively easy to read. Investments with low-risk scores are for you if you’re uncomfortable with big losses. And high-risk investments should only be pursued if you can really afford to lose some of your initial investment.

The scoring system was developed by the EU to keep customers safe.

Getting your money back if you need it

While it’s often better to hold on to your funds for a long time to ride out bumps in the market, it’s actually very easy to get your money back right away.

You can sell your fund back to the fund house at any time you like. Of course, the sale will be at the market price on the day of the sale, so you may come out at a loss. But it’s still always possible to get your hands on the cash when you want.

Following the golden rule of investing—diversify, diversify, diversify

We talk a lot about diversification as one of the golden rules that can reduce the risk of investing: making sure you don’t put all your eggs into one basket, so to speak.

Investing in funds is a simple way to diversify, because you’re not just buying one stock but a whole range of stocks or other securities.

And the more funds you have, the greater diversity you build in.

Going after a vision

You might have a particular vision of how or where you want to invest: for example, in green technologies or in emerging markets. Investing in a fund means you buy a broader range of investments within a particular theme, meaning you feel more like you’re moving a whole industry or target area forward with your money.

Lesson 3 on how long and how often to invest?

Unlike trading, investing is usually about long-term financial objectives.

Investors hold on to investments for longer to smooth out the highs and lows of the financial markets.

Experts tend to say that five years is the very minimum that you should invest. If you think you’ll need your money in this timeframe, then investing might not be right for you.

Looking beyond five years, invest for as long as you can to unlock the main advantage of investing: compound interest. Read how it works in our guide.

Lesson 4 on doing it alone or getting support

Do it yourself

More and more people are choosing to select their own investments.

Doing it yourself can feel bold and liberating. You get to decide what happens to your money.
Some select their own investments because they’re unsure who they can trust to give them neutral advice. Some find that getting advice is just too expensive.

Others do it for ethical reasons: they want more control over where their money goes and may even wish to make an impact.

‍Get help

‍If choosing your own investments feels like too much, there are alternative options out there.

Robo-advisers select investments for you based on your risk and investment profile. Although they may sound futuristic, they’ve been around a few years now and offer a valid alternative to more expensive personalised advice.

If you have extra cash to spare, you can also seek professional advice from a financial advisor or coach. Look out for advisors specialising in certain profiles, like freelancers, women, or small business owners.

Simply invest sustainably

Open an investment account that allows you to invest in funds that match your values.

Practice investing
Good to know

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Georges Bock is the CEO and founder of Moniflo. He sees money and investing as a way to shape the future by taking a bottom-up approach. He lives in Luxembourg with his family and his dog Yola and enjoys nothing more than watching his two children discover the world.


When will Moniflo be available for download?

At the end of 2022, you can already download a first version of the app to practice investing. However, if you want to buy and sell funds, you'll have to be patient. We expect to launch the final version of the app in early 2023. It's best to get on the waiting list to be among the first to test Moniflo.

Why doesn't Moniflo offer the option to invest in cryptocurrencies?

We want to build a platform for critical and conscious people who focus on long-term investments where the money serves a good purpose. Cryptocurrencies are highly volatile and speculative. Since they are not regulated, investors also do not benefit from the same high level of protection and risk diversification as with mutual funds. This does not fit with our vision of offering long-term investments.

How is Moniflo different from other investment platforms?

With our app, we want to reach all people who want to invest in a value-based way. We also focus on actively managed funds and not ETFs, as experts agree that ETFs have their limitations with regard to value-based investing. By the way, unlike other platforms, we do not charge any transaction or account fees. Moniflo is therefore also suitable if you only want to invest small amounts at first.

How can I be sure that the companies in the fund or portfolio I want to invest in are incorporating their values into their work and projects?

We work with Clarity AI, a provider of sustainable impact data, to obtain data for our Impact Score. This indicates whether the companies in the fund or portfolio are aligned with a specific UN Sustainable Development Goal (SDG). To calculate the Impact Score, Clarity AI tracks and measures a range of more than 60 relevant metrics linked to 52 SDG targets.

How is my money protected?

Moniflo will operate with a full investment firm license under strict EU laws and regulations. This means that your money is protected up to €20,000 by the Luxembourg Deposit Guarantee Scheme - and that your money and Moniflo investment account are safe.
We work with trusted partners and payment institutions to keep your cash deposits safe. Our payment partner Mangopay is subject to both national and EU payment regulations that ensure the safety of your money. In addition, your deposits are fully segregated and held in trust with unlimited protection. For example, your cash deposits up to €100,000 are protected by the Luxembourg Deposit Guarantee Scheme.

How is my data stored and backed up?

Your data is secured with 256-bit encryption so that only you and Moniflo can access your personal and financial information. We use state-of-the-art MPC technology that prevents unauthorized access to your investments. In addition, we employ multi-level security measures to protect your money and data, including secure servers.
In the course of providing our services and operating our business, we also share data with third parties who meet our security standards. You can read more about how and why we share your information in our Terms and Conditions.

Accounts and transactions are free of charge. How does Moniflo earn money?

Asset managers with investment funds on the Moniflo platform bear the bulk of the costs. They pay for their funds to be listed on the platform and pay for additional services. In the app, transactions and accounts are free. We expect that a small fee will be charged when users deposit or withdraw money from their investment account. The reason for this is to cover our internal costs, as well as to cover the costs of the payment provider.