Equity funds - principles, security and key concepts

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Equity funds are riskier investments than bond funds, but they can be more profitable. Equity investment funds are effective for people with at least a few years of investment horizon. A share fund portfolio can be managed independently or you can rely on TFI specialists.

Equity funds invest in shares of companies

Equity funds are those investment funds whose portfolios consist mainly of shares of companies. The shares in an open-ended investment fund may be purchased and resold at any time.

Shares, otherwise known as securities, are issued by joint-stock companies. They confirm the acquisition of rights to, inter alia, share in profits. Stock funds most often invest in shares of large companies, sometimes also of medium size.

Equity investment fund and investment risk

Equity funds are a tool for saving and multiplying resources for advanced investors with knowledge about investing and broad economic and economic knowledge. Luck and intuition are also useful. Unexperienced investors can rely on the knowledge and skills of experts working for investment fund companies (TFI) or special companies providing asset management services. Specialists place the money entrusted to them dynamically, according to their own predictions as well as observations and analysis of the market.

Due to the high volatility of the equity market, the investment risk for the equity fund is high. It largely depends on the investment horizon.

Return on equity funds and investment horizon

An investment fund's portfolio containing a minimum of 60, and often more than 80 or even more than 90 percent of shares creates opportunities for high returns over at least a few years of investment horizon. Short-term investments in shares usually do not bring the expected profits. In addition, if the shares are sold at the time when they have the lowest price, they can cause losses instead of profits.

Despite stock price increases and decreases, the general trend is usually upward. Investors in equity funds are therefore advised to participate in these funds on a long-term basis.

Valuation of equity funds - rules for determining value

Equity funds are valued on the basis of current stock prices on the Warsaw Stock Exchange (in the case of Polish companies). Securities are valued on an ongoing basis during stock exchange sessions, therefore their value may change very dynamically.

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