Investing in funds is not a bad idea for beginners. It is a convenient form of investment that offers many advantages.
You invest by definition in a diversified manner, the fund is managed by professionals, it is easily accessible and there is a wide range of products to suit all types of investor. In return, you pay certain fees and charges.
‘Fund’ is a common name for an undertaking for collective investment. It is a joint pot of money in which many small contributions end up forming a single large investment. The fund manager then invests that large sum according to a strategy that has been defined in advance.
1. Broad diversification
One of the most important pieces of advice on the stock market is 'not to put all your eggs in one basket'. And that's exactly what a fund achieves on your behalf. One of the main advantages of this form of investing is the broad diversification across different products. Those can include shares, bonds, real estate, gold or other investment products.
Adequate diversification is important in order to limit your investment risk. For example:
Investing in a fund that itself invests across the entire real estate sector means that if an individual construction company goes bankrupt, it will have virtually no effect on your profit or loss. As long as the construction sector performs well in general, you do well too.
Such diversification is usually seen as something that only professional investors can achieve. Thanks to investment funds, small-scale individual investors can also invest in a wide range of shares, bonds and other instruments.
2. No need to follow the financial markets closely yourself
The investment fund is managed by financial experts who adjust the mix of shares and bonds in it according to a predefined strategy. They do so in response to the current situation on the financial markets.
3. Combine shares and bonds in balanced funds
Funds come in all shapes and sizes. For example, you can invest in a fund that trades solely in shares or just in bonds. You will generally run more risk by investing in the former than the latter. Of course, you can opt for a balanced fund instead, where both shares and bonds are held, thus bringing diversification to your investment.
4. Extensive choice
There is an appropriate fund for just about every type of investor. Whether you're a cautious investor or are happy running additional risk for a potentially higher return, what you are determines your investment profile. You are free to choose a fund that corresponds to the level of risk you are prepared to take, which can range from defensive to highly dynamic.
You also have the option of investing in a fund offering capital protection or with a floor price monitoring mechanism. With capital protection, the fund is set up in such a way that – in principle – you get back all or part of your investment when the fund reaches maturity.
Floor price monitoring means that the fund aims not to fall below a certain level for a fixed period of time.
If you'd prefer to get advice from us first, we'd be more than happy to provide that too. Just contact your KBC branch or KBC Live.
5. For large and small amounts of capital alike
You don't need to be wealthy to invest in funds. You can start up an investment plan and invest from as little as 25 euros a month. And if you want to invest much larger amounts, investment funds can be an interesting option too.
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Heard about the KBC Easy Invest Service? With it, you select an investment fund that is actively managed by our experts. Tap or click below and find out all there is to know.
Larger investment amounts require a more specific approach. KBC Premium Banking gives you just that. Click or tap below to find out more.
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