What are some
of the things you need to know about capital growth fund? Primarily, it’s
typically an investment option under an insurance plan issued by your financial
institution of choice. You won’t be investing in the underlying assets so you
essentially do not have rights or ownership over them.
If this is
the case, how does your investment benefit you? Your ROI will be calculated
based on the performance of these assets, each of which has its own objectives
and risks. It will be subject to the charges of your plan and may actually be
lower than the ROI choices or the underlying assets.
There are
always risks in investment. For this reason, you should refer to the principal
brochure of the capital growth fund to read the prospectus of the underlying
asset’s objectives and risk factors. Typically, the objective is to achieve a
solid capital growth over time, either medium-term or long-term. You should
know though that this investment has less risk than a hundred per cent
equity-based unit trust. It also aims to get long-term results that keep up
with inflation.
The fund normally
involved in this investment are a wide spread of bonds, stocks, cash, and other
money instruments that are in the currency specified in the policy. It is
normally linked to a portfolio consisting of diversified funds. A big chunk of
the assets will involve equities and equity-related assets, with the remainder
being directly and indirectly invested in high-grade fixed income securities such
as bonds as well as other similar securities.
Equity assets
such as stocks are more volatile and present more risk than other forms of
investment such as high-grade fixed income securities. You may find the growth
fund performing poorly at some point when the conditions in the marketplace are
not compatible with the fund’s investment style. This could, of course, lead to
a significant decline in its value. Securities of companies included in its
growth investments may swing rapidly in a time of political and economic uncertainty.
Market and regulation changes can also deliver a huge impact.
The financial
institution you decide to go with will use its own discretion when it comes to
the regions it will invest in and how it plans to reflect its geographical
focus based on the currencies used.
As you can
gather from the above information, the value of shares in the fund will
fluctuate according to the changes in the value of the securities in its
portfolio. This is why it’s important to invest in a fund that’s managed by
excellent finance specialists.
