Fund 101

Equities, foreign exchanges, bonds and commodities are all investment options. As an investment beginner, there is a lot to know when it comes to which stock to pick, what kind of currency to buy, or which sovereign bond is the least risky. In this case, why not start from investment funds? Let's take a glance at fund features and advantages of fund investment.

Investment fund is an investment vehicle, managed by fund managers, that pools together capital from many investors to invest in a range of assets such as bonds, stocks and money market instruments. 

The composition and investment portfolio of each investment fund is selected and managed according to the investment goals, economic, market trend and conditions through fundamental and technical analysis, in order to manage the risks and in an attempt to generate returns.

Options for investment funds are either monthly plan (MIP) or lump sum investment. They are not limited to premium investors and it costs less to start than you may think. Investment funds pool capital from a group of investors, therefore even for ordinary investors with a relatively small amount of money, they can invest in various assets of different sectors and geographies through capital aggregation. The entry threshold for most investment funds platforms is not high. For example, the entry threshold of “SimplyFund” is as low as HKD 1, providing an affordable way for fund investment beginners to start investing in funds. 

The conventional wisdom has taught us not to put all our eggs in one basket. Compared with direct subscription of assets like single equity and foreign currency which could be affected by political, economic or market factors, investment funds may be better at risk diversification by offsetting the losses with profits gained from other stocks. Some funds are even able to do cross-border investments to diversify risks across different geographic regions.

It is comparatively difficult for investment beginners or general investors to invest directly in overseas assets, yet in the world of fund investment, the portfolio of regions can be formed in many ways, including the Greater China market, developed markets such as Europe and the United States, as well as emerging markets like India, Vietnam, Indonesia and Latin America. Besides geographies, there are a wide variety of sectors available. By industry, stocks can be categorised into healthcare, technology and property, etc. Bonds can also be divided into sovereign bonds and corporate bonds.

Investors can buy or sell investment funds on any dealing day though different platforms and channels. On the other hand, although investment funds should be considered a medium to long-term investment, there is no penalty when the investors sell their investment funds. Investors should always make their investment decisions based on their own circumstances.

As an investment beginner, you can complete the Risk Profiling Questionnaire to assess your risk tolerance level. The assessment is graded from conservative to aggressive. You may take the results as a reference to identify suitable investment funds.

Fund's performance and return depend on the fund manager’s ability in investment allocation and decision-making. You may take its past performance as reference, for example, its performance in different market scenario and relative performance compared with funds of same type. However, please take note that past performance is not indicative of future performance.

Investment funds can be divided into equity funds, bond funds, and balanced funds. Theoretically, equity funds carry the highest potential returns and also the highest risks, which may effectively help with capital appreciation in a bullish market. Bond funds are the most conservative ones, while balanced funds have relatively balanced the return and risk. Both of them may be more defensive in a volatile market. You should read the Offering Documents to understand the fund's objective.

In general, fund houses and distributors may charge investors subscription fee, redemption fee and management fee. If 2 funds have similar performances, their relevant fees may affect your return of the funds. All fees and charges are clearly and explicitly listed out in the Offering Documents. You don't need to worry about any hidden charges.