What Is a Fund?
A fund is a pooled investment vehicle that holds a collection of securities, such as stocks or bonds. Each investor owns a proportional share of the fund’s total assets. Fund saving is a practical way to gain exposure to financial markets without managing individual securities yourself.
Saving in funds involves risk.
How Funds Work
When you invest in a fund, you buy units (shares) in the fund. The fund manager uses the pooled capital to buy and sell securities according to the fund’s stated investment policy.
- You own a part of all securities held by the fund.
- Risk is spread across many holdings automatically.
- You do not need to select individual securities.
The fund’s assets are held by an independent custodian institution, typically a bank. All transactions must pass through the custodian, creating a financial separation between the fund and the fund company. If the fund company becomes insolvent, the fund’s assets remain protected and are not affected.
Types of Funds
Equity Funds
Equity funds invest in stocks, i.e., ownership stakes in listed companies. Returns depend on how the companies perform. Equity funds carry higher risk than bond funds, but offer greater return potential, particularly over long investment horizons.
A subcategory is the index fund, which tracks a specific benchmark index (for example, OMXS30 or MSCI World) passively. Index funds do not aim to outperform the index, but offer low fees and broad diversification.
Fixed Income Funds
Fixed income funds invest in interest-bearing securities such as government bonds, corporate bonds, and treasury bills. They generally carry lower risk than equity funds and are suitable for investors with shorter time horizons or lower risk tolerance.
Subtypes include:
- Short fixed income funds
- Long fixed income funds
- Corporate bond funds
Mixed Funds
Mixed funds invest in both equities and fixed income securities, providing a balance between growth potential and stability. The allocation may be fixed or dynamically adjusted by the fund manager based on market conditions. Quartal’s Stratega funds are an example of mixed funds with a fixed equity allocation.
Hedge Funds
Hedge funds operate with broader investment mandates than other fund types. Their goal is often to generate positive returns regardless of market direction. They can complement a portfolio by reducing correlation with traditional equity and bond funds.
Exchange-Traded Funds (ETFs)
ETFs are funds traded on a stock exchange in real time, like individual shares. They typically track an index and offer intraday liquidity. Unlike traditional funds, ETFs are priced continuously throughout the trading day.
Fund Management
A fund is managed by a licensed fund company. The fund manager and team conduct daily analysis of securities, markets, and macroeconomic factors to make investment decisions within the limits defined by the fund’s regulations.
Fund regulations must be approved by the Swedish Financial Supervisory Authority (Finansinspektionen), or the equivalent authority in the country of registration. These regulations define the fund’s investment scope, for example which markets or asset classes it may invest in.
How to Buy and Sell Funds
Quartal funds can be bought and sold through:
- Online banking
- The Quartal mobile app
- Quartal bank offices
- External fund distributors and platforms
When a fund is sold via an external distributor, the distributor receives a distribution fee from the fund company. This fee is included in the fund’s management fee and does not represent an additional cost to the investor.
Benefits of Monthly Fund Saving
Setting up automatic monthly savings allows you to invest consistently without timing the market. Benefits include:
- Reduced risk of buying at a single high price point
- Gradual accumulation through compound growth over time
- Simplified savings discipline
Important Notice
Past performance of a fund does not guarantee future returns. The value of fund units can both increase and decrease. It is not certain that you will recover the full amount invested.
