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Saturday, August 9, 2008

Investment Funds

From The Hoss's Mouth

Hoss Cents Free Financial Money Magazine turns its attention to the world of investment funds. Investment funds are perfect for the maiden investor. You can invest in any number of investments for a relatively low purchase price, and because the funds are managed by a professional fund manager, s/he makes the investment decisions. Similar to a horse owner who hires a trainer to train and manage a horse's race schedule.

Basically, investment funds are a group of investments made up of one or several asset classes. Separate funds concentrate on specific investment types, such as: stocks, bonds, foreign country investments, and/or any combination thereof.

Return on your investment comes by way of distributions of capital gains, interest, dividends or any other income the fund may earn. In addition, if you sell your portion of the fund for more than you paid for it you will have a capital gain. However, if the fund depreciates in value and you sell, you will have a capital loss.

Investment funds are usually set up as a corporation, partnership or trust. Each individual investor is issued units in a trust or partnership, or shares if the fund is a corporation.

The Hoss has listed various investment fund types below:

investment funds

Mutual Fund: units or shares are continually issued to investors

Closed-End Investment Fund: units or shares are limited and may be traded on the stock exchange

Exchange-Traded Fund: investments are proportional to a stock market or bond market index, and trade on a stock exchange

Segregated Fund: combines investment funds with insurance coverage

Labour-Sponsored Investment Fund (LSIF): tax incentives offered to investors and the fund gives venture capital to businesses

Commodity Pool: invests in derivatives or commodities unavailable to conventional mutual funds

The Hoss will give additional details on each of these fund types in the upcoming posts. In the meantime, hang onto the reins and enjoy the ride.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: Exchange-Traded and Segregated Funds

Previous Post:Shares What Are They?


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