Mutual fund
What is a mutual fund, why is it worth investing in it and what should be kept in mind?
- A mutual fund is a collective investment entity and is understood as the common property of shareholders collected by a management company by issuing unit certificates and investing this property.
- Unitholders' property rights are represented by units.
- The unit-holders of the funds may be natural persons, legal persons as well as other mutual funds.
- Mutual funds may be distributed in the form of a public or private offer.
- Units of open-end funds can be bought and sold.
- Mutual funds are managed by licensed asset managers (asset management companies) who invest the assets in the fund in financial instruments with the aim of appreciating them for the benefit of the fund's unitholders.
- The mutual fund's portfolio is structured and maintained to meet the investment objectives set out in its Statute and Sales prospectus.
- Through the mutual fund, an investor with even a small investment may have access to professionally managed portfolios of stocks, bonds and other securities.
Why invest in mutual funds?
A simple approach
Units are relatively easy to buy or sell, making them highly liquid investments. For certain types of assets, such as large office buildings, real estate funds are often the easiest way for retail investors to participate in such an investment.
Security
The assets in the mutual fund are segregated from the assets of the management company. There is therefore no risk to the unitholders of the fund arising from the insolvency of the management company. Legislation defines strict limits and rules for the management of mutual funds. Compliance with the rules in the management of mutual funds is monitored by the risk managers of the mutual funds as well as by supervisory authorities and auditors.
Transparency
To maximise transparency, management companies publish a variety of information that is useful to unitholders. For mutual funds, they publish regular reports on the management of the assets in the fund, which describe details of the state, change and development of the assets in the fund.
What types of mutual funds are there?
Equity funds are mutual funds whose assets are mainly invested in shares. Unitholders of an equity mutual fund, through their investment in the fund, become shareholders in a large number of companies whose shares are held by the fund and thus also participate in the returns on these investments. An equity mutual fund portfolio consists of a larger number of shares of different companies, and this spread of investments reduces the overall risk of loss and the impact of market fluctuations and achieves more balanced returns. Please note, however, that equity mutual fund units may be subject to large fluctuations in their current value.
Bond funds are mutual funds whose assets are mainly invested in debt securities such as government bonds or corporate bonds. Bonds are issued by entities known as issuers. In this way, issuers raise available funds on the capital market for their business, in return for which they undertake to pay interest to bondholders.
Mixed funds are mutual funds whose assets are invested in a combination of shares, bonds, mutual fund units and other financial instruments. They provide a balanced approach to capital growth and income by combining equity and bond investments, while also helping to reduce the overall risk associated with investing in individual securities by investing in different asset classes.
Real estate funds are mutual funds whose assets are invested in real estate, equity interests in real estate companies owning and managing real estate, and securities related to the real estate sector. By investing in a real estate fund, investors can participate in investments in large commercial buildings, land, logistics centres or other real estate to which they would not have access as ordinary investors.
Investment decision taken - what next?
Read our blog to find out, for example, where or how you can invest in mutual funds.
Mutual Fund Investor's Guide
Read our guide to the basic principles of investing that every investor should know.
Mutual funds managed by Erste Asset Management GmbH, through its Slovak branch
Real estate funds
How to invest in mutual funds?
You can invest regularly from 20 € per month in selected mutual funds, a list of which can be found here. You can also set up your investment savings from the comfort of your home via George app. Find out more about investment savings here.
One-off investment in mutual funds is possible from 150 € simply in any Slovenská sporiteľňa branch or even without visiting a branch via the George app. You can invest in all mutual funds offered by Erste Asset Management GmbH in Slovakia. You can find out more about the one-off investment here.
Combi deposit is a combination of an investment in a mutual fund and an term deposit. You can choose from three options: bond, active or thematic combi deposit. Learn more about the Combi deposit here.
What do I need to keep in mind when investing in mutual funds?
Market risk
One of the most important risks associated with investing in mutual funds is market risk. Investing always carries with it the risk of loss. If the market does not perform positively, it is possible that your investment will end up in a loss.
Cost
Nothing is free, and this is also true when it comes to investing. Investing in mutual funds comes with a number of fees. The most common fees include entry, exit and ongoing fees. There are other fees that are not as common, such as performance fees. It is important for an investor to have an overview of all the fees of the fund in which they are investing or wish to invest.
Other risks
There is more than just market risk associated with investing in mutual funds. For example, there is also currency risk, interest rate risk, liquidity risk or issuer risk. It is important for investors to be aware of these risks and consider their impact when investing.
Taxation of income
The proceeds from the redemption of the units are subject to income tax at the rate of 19% under the Income Tax Act. This tax is automatically withheld by the management company from Slovak mutual funds.
More information
Understanding the risks of the fund - no risk, no gain
Read our blog to learn more about some of the risks associated with investing in a mutual fund.
Compound interest - how to make interest work for you
Read our blog on compound interest. For example, find out what compound interest is and how to use it to your advantage.
What types of funds are there?
In this blog, the author discusses, for example, a comparison of mutual funds and ETFs or describes which securities funds invest in.
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This is a marketing communication. Please refer to the fund's Statute, the fund's Sales Prospectus and to the Key Information Document before making any final investment decisions. They can be obtained in Slovak language at all sales points of the management company and at www.erste-am.sk.
The mutual funds are managed by Erste Asset Management GmbH, with registered office at Am Belvedere 1, 1100 Vienna, Austria, registered in the Commercial Register of the Commercial Court of Vienna under registration number 102018 b, which is doing business in the territory of the Slovak Republic through the organisational unit Erste Asset Management GmbH, pobočka Slovenská republika, with registered office at Tomášikova 48, 832 65 Bratislava, IČO: 51 410 818, registered in the Commercial Register of the Municipal Court of Bratislava III, Section: Po, Insert No.: 4550/B. Investing in mutual funds is also associated with risk. The value of the investment may also decrease and there is no guarantee of a return on the amount originally invested. Past returns on an investment in mutual funds are no guarantee of future returns.