Funds are arrangements which allow investors to bring together a variety of assets. These may come in the form of savings accounts, stocks, bonds, and other forms of securities. By owning a certain percentage of the total fund, an individual is able to profit from any positive developments in the activity of the fund. Depending on the type of fund, he may have to purchase a certain number of units or he may have to invest in shares.
Units will have to be purchased if the fund is a unit trust. These translate into shares in the context of open ended investment companies. These two categories are essentially the same because they both function to bring together the funds of all participating investors. The only obvious difference is that trusts have a set number of shares which may be issued.
For investors, participation in funds investment provides the benefit of being able to participate in capital markets even without having to shell out large amounts of money. It also makes it much easier for investors to dabble in a variety of securities and assets. By investing in a wide range of assets or diversifying, as it is termed, an investor is able to minimize the risk of losing everything in case one type of asset does not do very well. It may be an even better option to invest in two or more funds. As such, it is a good idea for individual and beginning investors to look into the possibilities presented by managed funds.
