Investment

How to choose the best investment funds

Discover in this content what it is, what the main types are and how to choose the best investment funds.

Many investors, especially those who are starting their journey into the world of financial investments, share the same question: what are the best investment funds in the financial market?

This question is quite pertinent, because, when checking which are the best investment funds, it becomes easier to make assertive choices and select the assets that best fit your investor profile.

There is a wide range of investment funds on the market . Therefore, we can say that they are a great alternative for all types of investors. This is due to some advantages provided by this asset, such as diversification of the investment portfolio , protection against large asset losses, agility and security in movement.

Thinking about the importance of this instrument, we have prepared this content that will explain what an investment fund is and discuss how this asset works. Furthermore, you will learn about the main funds on the financial market and receive tips that will help you when choosing these financial investments. Check out!

What is an investment fund?

Investment funds behave similar to condominiums, in which each investor holds their relative share in relation to the fund. Such participation is given by the number of shares held by the investor, knowing that the share is the minimum share of the fund’s net assets.

Investment funds, how do they work?

Investment funds offer the possibility of investing resources in a wide variety of assets, from federal public bonds to shares, from private bonds to commodities, etc. Therefore, the same fund can have several investment instruments.

When we consider these characteristics, we can say that funds are a great strategy for diversifying your portfolio of financial investments . This is because, by investing in a single fund, you will have the possibility of diversifying your portfolio. This issue guarantees practicality and security in the movement of your resources.

However, it is also important to highlight that the liquidity, profitability and risk of the investment fund vary depending on each type of investment fund. All of these criteria are developed and applied by the manager responsible for taking care of the assets present in the fund.

What are investment funds?

Equity and fixed income funds are among the best investment funds.

There are several types of investment funds and each one has specific aspects. Check out the main existing funds and the most relevant characteristics about them.

Equity Funds

At least 67% of the financial resources present in variable income funds are invested in shares on the stock exchanges or related assets. Among them are subscription bonuses, stock indices, etc.

Multimarket Fund

Multimarket funds can invest in assets from various markets, for example, fixed income assets, stocks, foreign exchange, commodities, etc. They may present different allocation and concentration percentages seeking to maximize such investment alternatives,

Fixed Income Funds

They have at least 80% of the financial resources invested in fixed income financial investments. Among them are federal public bonds, CDBs, Financial Bills, Debentures, etc. It is also worth highlighting that the profitability of assets can be linked to various indicators, such as inflation (IPCA) and Selic.

Exchange Fund

Foreign exchange funds invest at least 80% of their resources in the fluctuation of foreign currencies, such as the euro and the dollar.  This is an investment intended for investors who seek to monitor the variation of foreign currencies against the real.

How to choose the best investment funds?

You need to take some factors into consideration before choosing the best investment funds for you.

There is no exact answer to this question, and this question depends on a set of factors. It is essential to understand the investor profile, which must include the definition of the objective, investment horizon, risk appetite, necessary liquidity (emergency reserve) and, finally, knowledge of the types of investment funds that exist.

Defining your objective

The first step in choosing the best investment funds is defining your horizon. Do you intend to invest in the short, medium or long term ?

This simple question will greatly influence your choices. If you choose to make investments thinking about the short term, it is important to choose more conservative financial investments.

On the other hand, if you opt for the medium term , you can take more risks by seeking financial investments with greater profitability potential and/or less liquidity.

Knowledge of the investor profile

There are a wide variety of investment funds in the financial market. Therefore, it is necessary to have knowledge of your investor profile to be able to choose the asset assertively.

On this topic, it is important to mention that there are investment funds aimed at a conservative profile (most of the resources invested in fixed income financial investments), moderate and bold (higher percentage invested in variable income).

Choosing the type of background

There are several types of funds. Among them are fixed income, shares, multimarkets, shares, real estate, foreign exchange, etc. Each type has specific characteristics.

Understanding the characteristics of the investment fund

Fixed income funds are more aimed at investors with a conservative profile and multimarket funds are aimed at people with a moderate profile. The funds in which the majority of resources are invested in shares, foreign exchange and real estate are aimed at people with a predominantly bold profile.

Pay attention to redemption deadlines

Also check the fund’s redemption deadlines. The greater the liquidity, the faster you will have the amount in your account. This issue is even more important for investors with a conservative profile.

As you can see, choosing the best investment funds depends on different factors. This happens because there are several types of investment funds in the financial market and, to make an assertive choice, it is necessary to have knowledge of the characteristics of each type .

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