A beginner’s guide: everything you need to know about the fund and ETF

Welcome to our ultimate guide on funds! If you're wondering what funds are and whether it's worth investing in them, you're in the right place. We will explain everything from the basics to the differences between other investment forms and the best investment opportunities.

What are funds?

Funds are a brilliant way to invest your money without having to worry about the daily ups and downs of the stock market. Think of them as a big pot where many people put their money, and someone else takes care of investing it for you—that’s exactly what we do at arvy. There are different types of funds depending on what they invest in. There are equity funds (company shares), bond funds (debt securities), or "mixed funds" that consist of various asset classes (e.g., stocks, bonds, gold).

The biggest differences between funds and other investment forms:

1. Diversification: With funds, you can spread your risk with a small amount since the share you buy always represents a part of the entire fund/portfolio. Instead of making a decision for each individual stock, you choose the selection made by the fund manager.
2. Professional Management: Instead of researching and trading yourself, we do this work for you. In other words, we select the 30-35 best companies worldwide for you.
3. Liquidity: You can usually buy or sell your fund shares once a day, unlike stocks and ETFs which you can trade during stock market hours.
4. Cost Structure: Active funds have higher costs than passive funds. Why? With an active approach, we as a team select the 30 best companies worldwide. With a passive/ETF approach, the titles are bought based on a predetermined pattern, such as based on the size of the company. Thus, there is no active selection process.

What is the difference between an ETF and a fund?

ETFs often follow a passive approach, meaning they track an index. An index weights companies by a factor like the size of the company ("market capitalization weighted") or the price of the shares ("price weighted"). Companies that grow larger gain weight in the index, meaning the ETF buys these stocks. Thus, the ETF does not decide how the money should be invested. This decision is rather left to the market. A fund often follows an active approach, meaning the manager selects the companies. We consider factors that assess the quality of a company. Our goal is to only hold companies in the fund that can reinvest profits internally profitably.

Is it worthwhile to invest in funds?

Funds are a great way to invest your money, especially if you don't have much time to manage your investments. With just a small amount, you can invest in a diversified portfolio and we take care of the rest.

Which funds are currently the best?

That depends on your personal goals and risk profile. It's always a good idea to conduct thorough research to find the best options for you.

Can you make money with funds?

With a long-term investment horizon, funds can offer solid returns. It's important to be patient and not react to short-term fluctuations. So if you invest regularly and let your money work for years—you can't go wrong.

How much money do you need to invest in funds?

The minimum investment amounts vary depending on the fund. Some require only a few hundred francs, while others need millions. There are also savings plans where you can regularly invest small amounts. We recommend starting with CHF 5,000 and then investing CHF 100 every month with a savings plan—important—use only money that you don't need for the next few years.

How much should I invest in the fund each month with the savings plan?

That depends on your financial goals and budget. It is important to invest regularly, even if it's just small amounts, to benefit from the advantages of cost averaging.

Do funds have high risk?

Funds can have a certain level of risk, especially if they invest in stocks. But by diversifying and holding long-term, you can reduce the risk.

Can I lose money with fund savings?

As with any investment, there is no guarantee that you will make money. Markets can fluctuate, but in the long term, funds have proven to be solid investments.

How long should you invest in funds?

It is recommended to invest long-term, ideally for five years or longer. This gives you enough time to go through market cycles and benefit from long-term returns.

What other investment options are worth considering?

Besides funds, there are many other investment options like stocks, bonds, real estate, and more. The best choice depends on your goals and risk tolerance.

Why are ETFs cheaper than funds?

ETFs often follow a passive approach, meaning they track an index. An index weights companies by a factor like the size of the company ("market capitalization weighted") or the price of the shares ("price weighted"). Companies that grow larger gain weight in the index, meaning the ETF buys these stocks. Thus, the ETF does not decide how the money should be invested. This decision is rather left to the market. A fund often follows an active approach, meaning the manager selects the companies. We consider factors that assess the quality of a company. Our goal is to only hold companies in the fund that can reinvest profits internally profitably.

Conclusion:

Funds are a great way to invest your money, especially if you don't have much time or experience. They offer broad diversification, professional management and the opportunity to build wealth over the long term. Remember that it's important to consider your personal goals and risk appetite before investing. If you have any further questions, please do not hesitate to contact us. Good luck with your investing!