How does investing work 1

How do funds work?

Investing in mutual funds. This still sounds exotic to many savers, only something for speculators. But that is by no means the fund investment.

The most important facts about funds at a glance:

1. What is a fund?

A mutual fund collects the money from investors. This capital is then invested in the financial markets for investors by the fund manager. The great advantage of a fund is that it spreads the risk. He not only invests in a share (equity fund) or in a bond (bond fund), which is what investors should absolutely avoid, but in many. With an equity fund, investors can benefit from the appreciation of the shares and dividend payments.

There are funds for every type of investor, from extremely risk-averse to risk-averse.

2. How can I moor safely? Could a fund be the solution?

Investing money is in the vast majority of cases associated with a risk. Ultimately, this also applies to the savings account. Rule of thumb: the higher the risk, the higher the interest. The risk can be mitigated by, for example, investing in multiple stocks. The principle: losses from one investment can be offset by gains from another. A fund that invests in a variety of investments can therefore help to invest more safely.

How do mixed funds work?

3. What if the fund company goes bankrupt? Is the savings gone then?

The money that investors put into a fund is what is known as a special fund. If the fund company goes bankrupt, it is protected.

4. What does a fund cost?

There is nothing for free, not even when investing in funds. The service that fund companies offer has its price. There is a one-time sales charge, sometimes a exit fee, and administration costs. Sounds dramatic, but it's not like that. There are often discounts on the front-end load. Withdrawal fees are very rare. The management fees are incurred annually for the management of the fund.

5. What is fund saving?

Fund saving is basically nothing different from normal saving. In this case, the savings amount goes to an investment fund - and not to the savings account, for example. The saver invests step by step in the stock market, for example. The advantage: the saver invests in a disciplined manner, i.e. always and not only when everyone is buying and the prices are particularly high. Over the years, the regular purchases usually result in an attractive average price, which can lead to a higher final return.

Further information on the subject of "fund saving"

How everyone can overcome their piggy bank dog and do more with their money.

6. How do stocks work? Does a fund investor have to know?

Fund investors do not need to know in detail how a share works. He should know that there are stocks and that these offer interesting long-term potential returns. The rest of the process - choosing, buying, monitoring, selling - is done by the fund manager.

A look into the multi-asset kitchen

Investing is like cooking. It all depends on the right mix.

7. What is the best way to invest money? Is a mixed fund the solution?

Mixed funds that are allowed to invest in stocks, bonds, currencies, commodities and real estate (at the same time) are a very flexible investment product. The investor receives an all-round service and is invested with his savings in a wide variety of markets. This ensures a broad diversification of risk and the opportunity to participate in the investment opportunities in a wide variety of markets.

Fund manager Klaus Kaldemorgen on the subject of "mixed funds"

8. Real estate as part of retirement provision. Yes but how?

Real estate can be a very useful building block for retirement provision. However, a purchase, especially commercial property, often exceeds the financial resources of a private investor. The solution could be a real estate fund. This invests primarily in commercial real estate (less often in residential real estate). In this way, private investors can benefit from the performance and rental income of the real estate in accordance with their share in the fund.

Further information on the subject of "real estate"

DWS Basics: Real Estate Funds

Not only the stock market can offer ways out of the low interest rate: real estate can also be an interesting alternative for private investors.

9. How do ETFs work and what is the difference to active funds?

An exchange traded fund, or ETF for short, is an exchange-traded index fund. With this type of fund, the fund manager simply replicates an index, for example the German leading index Dax, one-to-one. The fund will develop plus-minus like the Dax. The simplicity of construction makes ETFs very cost effective. But an ETF can never develop (significantly) better than its base index in the long term. In contrast, the fund manager of an active fund analyzes the markets and looks for the best opportunities and can buy or sell accordingly. If he expects a price decline, he could, for example, increase the cash on hand (cash ratio) in the fund.

10. Is a fund share something like a share?

A fund share is the smallest part of the fund or the smallest unit of fund assets. The investor purchases units in the fund. The investor participates in the fund's performance in accordance with these units. In this respect, a fund share is comparable to a share. Difference: With a fund share, he is involved in a large number of stocks, not in a single one.

11. What should I invest in? A question that fund investors also ask.

Unfortunately, fund investors also have to ask themselves this question. At the very least, investors should be roughly aware of whether they are investing in stocks (risky but also more promising) or bonds (more conservative) or, for example, high-dividend stocks (especially), real estate (more long-term) or commodities (very risky) want. In general, it is not an either / or decision anyway, but rather both and. In a balanced portfolio stocks, bonds, real estate and commodities have their place. The weighting then depends on the personal risk appetite. If you want to make it easy for yourself, you can invest in a mixed fund whose weightings best suit your needs.

Retirement provision - long-term asset accumulation

Long-term provision for one's own retirement is essential for one's financial situation in old age. With a strong partner, anyone can build up assets strategically in order to secure themselves financially.

12. Topping up your pension with a fund - does that make sense?

For investors who do not want to invest directly in stocks and bonds, investment funds are an excellent instrument for building up a private pension, in addition to the state pension and / or a company pension. With investment funds, investors can invest long-term, with a one-off payment or step by step (fund savings or Riester funds savings) and can then benefit from increases in value or dividend payments. Investment funds are strictly monitored (regulated) by the state. The money invested is a separate asset and is protected in the event of the fund company's bankruptcy.


Interesting facts about savings and retirement provision