Investing is an interesting way to multiply money, but it requires appropriate knowledge and experience. One of the popular options are investment funds, which allow you to gradually build capital, even for those who have no experience in investments, because the funds are managed by professionals. Check how it works!
What are mutual funds?
Investment funds are a form of collective investment. They are created and managed by Investment Fund Companies (TFI). People who do not have the ability or willingness to invest directly, e.g. in shares or bonds, can buy participation units in these funds. In this way, they gain access to a wide range of financial instruments managed by experienced specialists.
The activity of investment funds is regulated by the Act on Investment Funds (Act of 27 May 2004 on investment funds and management of alternative investment funds, Journal of Laws of 2004 No. 146, item 1546) and supervised by the Polish Financial Supervision Authority. They can invest in different asset classes, such as stocks, bonds, or commodities.
Types of investment funds
There are many different investment funds in Poland, which can be divided into several main categories:
Equity funds – invest funds primarily in shares and other equity securities. They are characterized by an increased level of risk, but also potentially higher returns;
debt funds – they invest mainly in bonds, both treasury, non-governmental and corporate. They are characterized by a lower level of risk compared to equity funds and a relatively lower rate of return;
cash and money market funds – invest in short-term debt instruments, such as treasury bills or bank deposits. These are low-risk funds;
mixed funds – combine investments in instruments with different levels of risk, while managing the risk of the entire investment portfolio in accordance with the chosen strategy. These include, m.in, balanced funds, active allocation funds or funds with capital protection.
If you don’t know what type of mutual fund to choose, you can opt for a lifecycle fund, such as Goldman Sachs TFI Perspektywa, which changes over time and adjusts the risk profile to your age.
Risks associated with investing in funds
Investing in funds involves a certain level of risk, which depends on the type of fund you choose. Equity funds are characterized by higher risk, but also potentially higher profits, while debt and cash funds are burdened with lower risk and correspondingly potentially lower return. Remember that investing in a fund involves a different level of risk than investing in bonds or deposits – there is always the possibility of losing some or all of the invested funds.
Remember that investing does not follow a single scenario. Before you decide what you want to invest in, think about what level of risk is acceptable to you and how much profit you want to make at any given time. You can manage the risk. If you want to reduce them, you can do so through diversification (choosing different funds), as well as regular payments (this will reduce the impact of fluctuations in the price of participation units on the entire investment).
How to start investing in funds?
Getting started with fund investing is relatively simple. You can do this through the website of the selected Investment Fund Company. All you need to do is create an account and make your first payment to the investment fund of your choice.
It is worth remembering that most funds require a minimum investment amount, often PLN 200 or more. When choosing a TFI, also take into account any handling fees charged when buying participation units, because these costs also affect how much you can actually gain.