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How does a UCITS fund work?

20 Mar 2014 | Financial education  


If a group of friends decide to put their savings in a common pot, they can invest collectively higher amounts, obtain better conditions and reduce costs while being able, at the same time, to acquire a wider range of stocks. If the pot contains enough money, they can go a step further and hire an experienced professional who will help them identify those stocks that offer the highest potential for gains. And if their investments generate profits, they can either keep them in the pot and invest them as well, or decide to distribute them proportionally to the amount that each of us has paid into the pot. An investment fund works in principle in the same way, with the significant difference that the initiative to create such a “common pot” does not emanate from a group of investors, but from a financial institution.