Fund Trading
How🀅 do investment funds work? What are the different kinds 💯of funds? How do funds generate profits? Browse Investopedia’s expert-written library to learn more.
Fund Trading Basics
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Frequently Asked Questions
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Many online brokers make it easy to open an account quickly and without a lot of money. Some require no initial deposit. Hoꦐwever, you will need to fund the account from your checking, savings, or another brokerage account before you can begin trading.
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Hedge funds are risky, actively managed investment pools whose managers use a wide range of strategies, often including buying 🧸with borrowed money and trading esoteric assets, in an eff🌳ort to beat average investment returns for their clients.
Learn More: A Beginner's Guide to Hedging -
Trading shares in mutual funds are different from trading shares in stock. Mutu♑al funds require minimum investments of anywhere from $1,000 to $5,000, and they only trade once a day after the markets close. Mutual fund fees 💃can be complicated. Understanding these fees is important since they have a large impact on the performance of investments in a fund.
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Margin funding in the context of trading is borrowed funds from a broker that is used to trade a financial asset, which forms the collateral for the loan from the 🙈broker. Levไerage conferred by margin will tend to amplify both gains and losses. In the event of a loss, a margin call may require your broker to liquidate securities without prior consent.
Learn More: Why Is Buying Stocks on Margin Considered Risky?
Key Terms
- Hybrid Fund
A hybri🌺d fund is an investment fund that is characterized by diversification among two or more ass🌱et classes. These funds typically invest in a mix of stocks and bonds. They may also be known as asset allocation funds.
- Passive Management
Passive management, also known as passive strategy or index investing, is a style of management associated with mutual funds and ETFs where a fund's portfolio mirrors a market index. It is the opposite of active management in which a fund's manager attempts to beat the market with various investing strategies and buying or selling decisions of a portfolio's securities.
- Short-Term Investment Fund (STIF)
A short-term investment fund invests in short-term money market🐼 investments of high quality and low risk. This type of fund is considered to be one of the most conservative investments, and they are often used to protect capital. Short-term investment funds are generally expected to keep pace with inflation and earn marginally higher returns than a standard personal savings account.
- Performance-Based Index
A performance-based index is a stock index that adds the amount of all dividend payments, capital gains, and other casಞh disbursements to the net stock price. When measuring the performance over a given time period, the performance-based index will add these transactions to the net share price before calculating the index return. Some investors believe a performance-based calculation produ♉ces a more accurate measure of performance than the price approach.
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Explore Fund Trading
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