What are funds? Simply explained by Moniflo

Do you want to build up assets and decide for yourself what to invest in? A good decision! With the right preparation and a little help, even beginners can succeed. At first, the many technical terms can seem intimidating.  

But don't worry. Once you understand what it's all about, it's not that hard! At Moniflo, we don't just help you find the right funds. With the help of our tutorials and blog articles, you can easily expand your knowledge.  

Are you ready to dive deeper into the exciting world of funds? Below, you'll learn all about the different types of funds and how they can help you achieve long-term profits. What are investment funds and how do sustainable aspects show up in funds? We explain it to you.  

In a nutshell

• Funds are a pool for investments in securities
• They come in different types, e.g. equity funds, bond funds or real estate funds
• Sustainable funds have a dual purpose: they invest in companies that pursue environmental and social goals, and they generate a financial return for investors
• If you want to have the most important aspects around funds explained in a simple way, you can acquire further knowledge with the help of Moniflo's tutorials and blog articles

Funds - simply explained

Have you ever wondered what the technical term "fund" means? We'll explain it to you.

A fund is a financial instrument that allows investors to invest in a variety of assets. These assets may include stocks, bonds, real estate or other securities.

Funds are launched and managed by investment companies. Investors purchase shares in the fund and thereby receive a basket of different assets selected by the fund manager.

They offer investors several advantages. For one thing, it allows them to invest in a broad range of assets, which reduces risk. For another, the fund manager takes over the task of selecting and managing securities, so investors do not have to become active themselves.

In addition, these are often less expensive than direct investments in individual securities. However, there are also some disadvantages to investing. For one thing, fees and costs may be incurred that reduce the return. For another, the fund manager may not meet investors' expectations, resulting in losses.

The different types of funds  

There are different types of funds that are suitable for different investors. Do you want to know what the terms stand for? Below we explain it to you.

ETFs

ETFs (Exchange Traded Funds) are index funds traded on the stock exchange. They track a specific index, e.g. the DAX, Dow Jones or S&P. An ETF is thus a collection of different stocks or bonds that meet a specific criterion.


Real estate funds

Real estate funds are funds that invest in real estate. This usually means investing in developed land, but more rarely undeveloped land is also acquired. Investment properties include commercial properties such as office or industrial buildings, but also residential properties and retail properties. The return on investment is derived from the income generated by the sale or rental of the real estate.


Money Market Funds

Money market funds are ideal for parking capital in the short term. The investment is primarily made in short-term and relatively safe securities such as bank deposits and bonds with a short remaining term. This means that the return is comparatively low, as is the risk.

Bonds and bond funds

These funds are based on fixed-income securities, for example government or corporate bonds. The investor has the opportunity to profit from this fund through regular interest payments and appreciation in the market.

Mixed and multi-asset funds

Multi-asset funds, which include a variety of asset classes such as equities, bonds and commodities, are particularly flexible and can adapt to changing market conditions.

Equity funds

By buying shares in selected companies on the stock market, fund managers seek to profit from their appreciation in value. In addition, just as with the direct purchase of shares, investors receive the dividends that companies pay out.  

Guarantee fund

Investors who invest in guaranteed funds receive a certain minimum amount back at the end of the term. This can be either the capital invested itself or a certain percentage of it. However, these funds are less flexible and usually more expensive than other investment options.

Commodity funds

Commodity funds are a promising way to participate in international commodity development. They focus on different commodities and thus spread the risk over several shoulders. Since investment funds cannot usually invest in physical commodities, they resort to financial instruments such as futures contracts.

Sustainable investment funds - what is it?

This is a type of investment fund that focuses on sustainable investments. This means that the main objective of the fund managers is to select companies that, apart from the prospect of positive financial development, have a positive social and/or environmental impact.  

How do sustainable funds work?

Most sustainable funds are actively managed. This means that a fund manager or team makes decisions about investments. Sustainable funds can also be passively managed. Passively managed funds track a specific index, such as the MSCI World Sustainability Index.

There are different types of sustainable funds, which differ in their target direction. Some funds aim to address specific social and environmental issues. Other funds focus on specific sectors or countries.  

The following are some of the most common types of sustainable funds:

Theme Fund

These funds invest in companies involved in activities that address a specific social or environmental issue. Examples of themed funds include green funds, which invest in companies involved in activities that address climate change, and health funds, which invest in companies involved in developing new treatments for diseases.

Sector funds

These funds invest in specific companies in a particular sector or industry. By investing in individual stocks, the risk is spread and at the same time a stronger return is achieved. Examples of sector funds are renewable energy funds and technology funds.

Country Fund

Country funds can also be thematic and invest in companies involved in activities that address a specific social or environmental issue.

Easily find sustainable funds with Moniflo

Now you have an overview of the individual investment funds including their definition and have also learned that sustainable funds exist. They are a promising way to invest in different asset classes and thus build a diversified portfolio.

But how do you actually find suitable funds? The world of funds seems opaque, especially for beginners. In addition, the concept of sustainability is broad. At Moniflo, we want to change the lack of transparency and provide investors with all the information you need to find suitable funds.  

We are convinced that everyone can invest, even with small assets. If you're just getting started, you'll find many more articles on our website, such as Investing for Beginners. You will also find tutorials in the app that will help you gain more knowledge.  

Make your money matter! Simply invest in what is important to you. With Moniflo you can find suitable sustainable funds and manage them. Do you want to be part of the app launch? Then sign up for the list and benefit from fast access. 

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