About investment funds
An investment fund operates by placing the investors' funds in various securities constituting the fund. The fund is divided into evenly sized fund units, each granting identical rights to the assets held in the fund.
The unitholders consist of investor corporations, individuals and foundations.
An investment fund is run by a Fund Management Company established for this purpose. The Fund Management Company represents the unitholders and operates on their behalf in matters concerning the fund.
An investment fund accepts new subscriptions on an ongoing basis thereby allowing investors to purchase new units at any time. Likewise, investments can flexibly be cashed in as the fund always redeems units at the investor's request. At the time of subscription as well as at the time of redemption of fund units, the investors pay or receive the current market value price for their units.
The investment fund offers various advantages, for example:
- Spreading of risks. Funds invest in diverse shares, thereby reducing risk.
- Expertise. Investment decisions are made by experts who constantly monitor the security markets and the development of the funds.
- Trade savings. A investment fund trades shares in high volume thereby benefiting from lower costs than an average individual investor. Investment fund capital gains are tax exempt.
- Good liquidity. Purchase and redemption of units are quickly transacted.
- Supervision. Official supervision guarantees good investment protection. Investors can monitor the day-to-day development of their funds in the newspapers.
Profits from the sale of securities as well as interest income and dividend income are tax exempt for the investment fund.
The increase in the value of an investor's fund units becomes taxable upon redemption of fund units by the investor. Profits on sales are taxed as capital gains at a current (2018) rate of 30-34% for individuals.
Dividends paid to return unit owners are taxed as a capital gain. For owners of growth units, the corresponding earnings are realized and taxed only upon sale of fund units by the investor.