Investment fund (Investmentfonds)

An investment fund (German: Investmentfonds) pools money from many investors and invests it together, for example in stocks, bonds or property. You buy fund units and thereby own a share of the whole pool. The fund's assets are segregated assets, kept separate from the fund company.

There are active funds, where a fund manager picks securities, and passive funds such as the ETF, which simply tracks an index. Active funds often cost 1.5 to 2 % a year, sometimes plus a front-end load. Many fail to beat their benchmark after costs over the long run. For tax, funds benefit from the partial exemption.

Example: you buy 1,000 euros of an equity fund with a 5 % front-end load. Only 952 euros are invested; the rest is an immediate cost. What that means over the years can be checked in the savings plan calculator.