Let’s say you are choosing between a huge pizza where each slice has a different topping and a huge pizza with a single topping. Intrigued by variety, it turns out that instead of having only Margarita, you can now grab a piece of Marinara, taste Quattro Stagioni or enjoy Cappriciosa.
The same goes for mutual funds. Buying into a mutual fund, an investor gets various pieces of the market and access to a well-balanced and diversified portfolio.
All mutual funds work in the same manner. Nonetheless, they can differ geographically, from country to country. Let’s take a deeper look and start with the basics of mutual funds.
Nuts and Bolts
A mutual fund is a type of investment fund that gathers money from a group of investors and spreads it across various securities. Investors have their share in a fund; it doesn’t matter how much you’ve put in. The huge plus that mutual funds have is that they help individuals with a small capital to have access to a good portfolio.
It means you don’t have to spend sleepless nights considering whether this bond is better than this stock. You just invest your funds in both and even more.
Can I Invest in a Fund Based Overseas?
You can only buy into funds that are registered with your country’s regulator. For example, non-UK residents can’t access UK funds.
Don’t confuse an international fund with a foreign fund. These are worlds apart. If a foreign fund is available for purchase only for its country residents, international funds can shape a basket of securities from any country except an investor’s home country.
Global funds is yet another story. Global funds can buy securities from all over the world.
What's in Common?
A lot. Firstly, all mutual funds take money from many investors to put them into various assets. Secondly, both individual investors and entities can buy into mutual funds. Thirdly, all mutual funds are subject to severe regulations, that vary by country and serve entirely for the clients' protection.