How to Achieve Wealth Growth Through Funds? A Complete Guide Every Investor Must Read

For busy professionals with little investment experience, finding a financial management method that is both time-efficient and capable of steady appreciation is an urgent task. As a professionally managed collective investment tool, funds can precisely meet the needs of such investors. This article will provide an in-depth practical guide on how funds make money, how to build a reasonable investment portfolio, and how to subscribe to funds, helping you grasp the core logic of fund investment.

The Core Logic of Fund Investment: How It Helps You Make Money

Many investors are confused about the question “How do funds make money?” In fact, a fund is a collective investment managed by a professional team. Banks or brokerages are responsible for raising funds, pooling investors’ money, and entrusting fund managers to invest uniformly in assets such as stocks, bonds, and money markets. The fund custodian is responsible for the safety of the funds.

The sources of profit for funds include three aspects: first, appreciation gains from invested assets (such as stock price increases, bond interest); second, dividend income; third, growth in the net asset value of fund units. Compared to other financial products, funds have features such as relatively controllable risks, low investment thresholds (generally starting at 3,000 yuan), and high liquidity.

A Wide Variety of Fund Types: Choosing the Right One Is Key

There are many types of funds in the market, which can be divided into five major categories based on investment targets. Understanding the characteristics of each type of fund is the first step in determining your investment strategy.

Money Market Funds focus on liquidity, mainly investing in short-term bonds, commercial paper, and certificates of deposit, which are low-risk assets. These funds have the lowest risk but also relatively limited returns, making them suitable for investors with high safety requirements as an emergency fund pool.

Bond Funds primarily focus on fixed income, covering government bonds, treasury bonds, corporate bonds, etc. The risk varies significantly among bond funds, with those investing in government bonds being the least risky. These funds require a longer investment cycle to achieve substantial returns and are suitable for conservative investors.

Stock Funds mainly invest in stocks, pursuing higher returns but with the greatest volatility. They face market systematic risks, as well as individual stock selection and management risks, making them suitable for investors with a certain risk tolerance for long-term investment.

Index Funds track specific indices (such as stock indices, commodity indices) to achieve investment returns. Fund managers buy constituent stocks of the index, striving to keep the fund’s performance aligned with the index trend. ETFs are a common form of index funds, offering advantages like good liquidity and low costs.

Hybrid Funds invest simultaneously in stocks, bonds, money markets, and other assets, with risk and returns between stock funds and bond funds, making them a good choice for risk-averse investors.

Below is a detailed comparison of the five fund types to help you quickly judge:

Investment Portfolio Allocation: Don’t Put All Your Funds into a Single Fund

A common mistake among investors is investing all their funds into a single fund, which significantly amplifies risk. A rational approach is to build a multi-layered fund investment portfolio based on your risk tolerance.

The first step is to assess your financial situation and risk preferences. How much idle capital do you have? How much loss can you tolerate? What is your investment horizon? The answers to these questions will directly influence your allocation plan.

Based on different risk preferences, here are three typical investment portfolio schemes:

Aggressive Investors (high risk tolerance, long investment horizon):

• Stock Funds 50%
• Bond Funds 25%
• Money Market Funds 15%
• Other Assets 10%

Balanced Investors (moderate risk tolerance):

• Stock Funds 35%
• Bond Funds 40%
• Money Market Funds 20%
• Other Assets 5%

Conservative Investors (low risk tolerance, prioritize principal safety):

• Stock Funds 20%
• Bond Funds 20%
• Money Market Funds 60%

The benefits of this diversified allocation are obvious: when stock funds decline, bond and money market funds can stabilize the overall returns; when the stock market rises, the high proportion of stock funds can capture growth opportunities. Regular rebalancing can further optimize investment results.

Fund Subscription Process: Three Steps to Start Your Investment Journey

After determining the fund types and allocation schemes, the next step is actual subscription. The fund subscription process is relatively simple, usually divided into the following steps:

Step 1: Choose the Purchase Channel You can subscribe through banks, brokerages, fund companies, or third-party platforms. Different channels have different fee discount policies, so it’s advisable to compare options.

Step 2: Fill Out the Subscription Application Prepare your identification verification materials, fill out the fund subscription form on the chosen platform, and confirm the investment amount and fund code.

Step 3: Complete Payment Transfer funds via bank transfer, online banking, or other payment methods, and wait for subscription confirmation. Usually, the subscription units can be confirmed within 1 to 2 working days.

Understanding the Costs of Fund Investment

Investing in funds is not cost-free; multiple fees are incurred throughout the process from subscription to redemption. Understanding these fees helps you accurately calculate your actual returns.

Subscription Fee is a fee deducted directly at the time of purchase. Stock funds typically charge 3%, bond funds 1.5%, and some sales channels offer discounts.

Redemption Fee occurs when you sell your fund units. Most funds in Taiwan do not charge redemption fees, but if purchased through banks (specific trust funds), the bank may charge a trust management fee deducted directly from the net asset value.

Management Fee is an annual fee charged by the fund company, usually ranging from 1% to 2.5% of the fund’s assets, depending on the fund type. Index funds tend to have lower management fees due to simpler management strategies.

Custodian Fee is charged by banks or custodians for safekeeping the fund assets, approximately 0.2% annually.

Although these fees seem small, they accumulate over time and can be a significant expense. Choosing low-cost funds can effectively improve net returns.

The Five Major Advantages of Fund Investment

Compared to directly purchasing stocks or other financial assets, funds as a financial management tool have clear advantages:

Professional Management is the core value of funds. Fund managers possess deep market knowledge and extensive research capabilities, enabling more informed investment decisions than retail investors, which helps achieve better risk-adjusted returns.

Diversified Portfolio is built into the fund’s operation. A single fund may hold dozens or even hundreds of securities, greatly reducing the risk of failure from any single investment.

High Liquidity is an advantage over some other financial products. Most funds can be bought and sold on trading days, allowing quick cash realization if needed.

Low Investment Threshold allows ordinary investors to participate in diversified investments. An entry capital of 3,000 yuan is much more accessible than directly buying stocks or real estate.

Flexible Asset Adjustment gives investors the ability to change their investment strategies at any time. As life stages and market conditions change, investors can adjust fund allocations flexibly to achieve dynamic risk management.

Conclusion

Fund investment is not an unattainable financial activity. As long as you understand the basic principles, the logic of how to make money, and how to reasonably allocate your investments, even beginners can achieve steady appreciation through funds. The key is to plan scientifically according to your financial situation and risk tolerance, regularly review and adjust your investment strategies, and let time and compound interest create wealth for you.