A fund is a portfolio, in which many investors - in form of one-off amounts or savings plan rates – pay money. This money is invested by a capital management company in shares, bonds, commodities, real estate or other objects. The managing company of the fund, also known as the issuer, has the status of a credit institution, which results in strict investment principles. They ensure, among other things, that the principle of risk diversification is maintained. Companies may only conduct highly speculative transactions subject to certain conditions.
Funds that are open to all investors without restriction and whose share issue is not limited, are also referred to as mutual funds.
In order to implement their investment ideas, the issuers select the investment objects according to the desired risk/yield ratio. An important aspect here is the broad diversification of investments, through which the company can compensate for any short-term weaknesses of individual securities by the good performance of others. Investment funds usually run indefinitely, which means they have no expiry date.
Equity funds must have a pool of different equities in their portfolio and are usually only allowed to invest a maximum of 5% of the fund's assets in a single security. As a result, investment funds typically hold at least 20 different securities in order to remain true to the principle of diversification.