Risk and reward, these two words are correlated heavily with the trading of stocks and bonds. Individual stocks and bonds tend to have higher personal risk, but also higher possibility for rewards. Mutual funds are another type of lower risk investment where you and other people have the opportunity to invest money or capital in a collective fund. This group of people’s money is then invested by a fund manager in a diversified array of stocks, bonds, futures, currencies, treasuries and money market securities that they believe will do well.
By investing with other people, you are reducing the amount of risk that will be on your own assets. Although this is positive, the payouts tend to be smaller because they are distributed across all of the investors.
There are many benefits to investing in this product. For one, this type of fund offers built-in diversification of investment portfolio; you are not putting all of your eggs in one basket, which can offset possible downfalls in one category with growth in another. Another being that these funds are chosen by a professional, so they are likely to invest in better areas than an amateur would.
European mutual funds have become increasingly popular all across the EU, with this year pushing the limit to extend beyond €10 trillion in assets invested in ucits. Ucits stand for undertakings for the collective investment in transferable securities, and offer a regulated vehicle for which these funds can be bought and sold across nations.
Ireland and Luxembourg are two of the leading countries for fund investing, making up close to 56 pc of the total. The European Fund and Asset Management Association noted that the 29 countries they collected information from showed an overall increase of 7.8 pc in investment; when inspecting more closely, there was an overall rise of 8.9pc in Dublin alone.
Although these Ucits standards seem to be fairly solid, there are many aspects that the EU suspects they will need to inspect and edit after Brexit. Additionally, the EU stock market is bound to be changed due to the change in status of the UK. Under their new laws, and new laws of the EU that exclude the UK, there is bound to be discrepancies.
Overall, Brexit poses a threat to the market but not one that is large enough to heavily disrupt the continued investment in mutual funds.