Mutual fund


An investment fund or mutual fund is a collective investment institution that collects money in the form of contributions. With the aim of subsequently investing it jointly.

By joining as a single entity, a very simple objective is pursued: to achieve a higher return than to invest separately. A mutual investment fund is intended for any type of investor.

So let's imagine we managed to convince 10 friends to invest together.

The first question that would arise is who of the 10 knows something about finances. Let us assume that nobody has this knowledge. The solution would be to hire a company specializing in investments, which we are going to call a «management company».

The second point to be debated is who is going to keep all those assets or money. Since the human being takes into account the principle of bad faith by nature, the solution will be to put it in a “depository entity”. The sole purpose being to safeguard the money of the ten friends.

Main characteristics of a mutual fund

All the people who come together under the umbrella of the fund are called participants. In the same way, the investor's return is established based on the collective results. Mutual funds can be dedicated to investing in financial products, stocks, bills, bonds, derivatives, currencies, ETFs or other funds. Or, also, in non-financial products such as real estate, art, etc.

The funds have no entry limit. That is, the more the better for everyone. However, they do consider a minimum contribution. To do this, setting these examples:

Investment fundsMinimum Contribution (€)
Aberdeen Global II Euro Govt Bd A2200.000
Allianz Enh Short Term Euro I EUR1.000.000
Amundi Fds Bd Euro High Yield IE-C500.000
BNY Mellon S&P 500 Idx Tracker A EUR5.000
Dexia Eqs L France C Acc30.000
Fidelity America E-Acc-EUR200
HSBC GIF US Equity A Inc30.000
Henderson Horizon American Eq X22.500
Heptagon Yacktman US Equity A15.000
ING (L) Invest US High Div X EUR Hdg200
INTECH US Core A EUR Acc2.500
Invesco UK Equity E500
JPM America Equity A (acc) -EUR (Hdg)35.000
M&G North American Value USD A1.000
Pioneer Fds US Fundamental Gr C EUR ND200
Rent 4 FI Bag24
Rent 4 USA FI10

Mutual funds offer many tax advantages to taxpayers. Mainly, by the tax deferral of capital gains. All this, because the sale of the shares of a fund will not be taxed, provided that the amount obtained from them is transferred to another mutual fund.

There are thousands of investment funds. Therefore, for this, there are many agencies that try to rate each of the funds to help us know in which fund to invest. The best known company in the fund analysis industry is Morginstar. Thus, its stars have become a basic factor in the analysis of investment funds.

What and who forms a mutual fund?


Participants or investors are those people who invest their money, which goes to the common equity of the fund and in return receive shares of the fund in proportion to what they invest.

The funds are flexible, you can enter at the time of creation or later, and in the same way you can withdraw totally or partially at the time you want.


The shares are the equal parts in which the assets of a mutual fund are divided, this number of shares is not fixed, it depends on the purchase of shares (subscription) sale (redemption).

Consequently, the value of the shares also varies. The value on a specific day is called the net asset value of the mutual fund. That is why the shares are negotiable securities, but they are not usually traded on any market, it is the management company itself that sells or repurchases the shares.

Management company

The management company is who administers and manages the fund, determines what investment policy is to be followed. In other words, where the assets of the fund formed by the contributions of the participants will be invested.

Each investment fund has a single management company. Although, in turn, it can manage different funds. The managers charge subscription and redemption fees (which can reach 5%). In addition to commissions for the result, the management, the control of the depositary company, the accounting and for the preparation of reports periodically for the CNMV.

Depository company

It can be a bank, savings bank or securities company. Its function is to safeguard the fund's assets, which can be assets or cash, and it also performs control functions over the manager, for the benefit of investors.

To learn more about investment funds, read the types of investment funds and learn what are the advantages of investing in an investment fund.

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