What is the difference between investment certificates and investment funds?

If I have money which is better investment way buy investment certificate or buy investment fund documents?, Ok, what is better for me if I buy an investment certificate, and when is it better for me to buy an investment funds?

Look, my dear: In principle, these investment certificates will be savings vessels with a fixed or variable return that banks create to attract individuals’ savings, and thus increase the bank’s ability to create credit and lend to others, and the customer can choose comfortably the quality of return from the beginning, in certificates with a fixed return and with a variable return

Rather, cash/savings investment funds are an investment pool whose objective is the participation of individuals and/or companies in investments injected by the fund into assets such as treasury bills, treasury bonds and other financial assets of a certain nature, and whose returns are naturally semi-changing, perhaps higher than the returns of investment certificates and perhaps be less.

Also, another difference between investment certificates and investment funds is that the quality of profit differs slightly between the two. In the certificates, the return is only periodic (meaning you buy the certificate and the return comes to you every month or 3 months according to the certificate), but the origin of the amount remains fixed, while investment funds offer a diversity feature. The return is so that you can find a fund that distributes a periodic return, and it is also possible that the value of the document itself increases, and therefore you can get a capital profit, or in other words, a cumulative one.

Let’s give an example

One has 100 thousand pounds, and I will buy a certificate of 50 thousand with a return of 12% for a year, and the return is distributed monthly, and with the second 50 thousand, he will buy 1000 documents (at 50 pounds per document) from the documents of an investment fund, let it be a cash or savings fund

And back, after a year, we will see the news of his money

 You will find that our friend will take a return from the certificate of 500 pounds per month, and at the end of the period (3 years) he will receive the 50 thousand as it is.

And when we saw the news of his money in the fund, we found that the fund was distributing a monthly return of 400 pounds, and the price of the document became 60 pounds.

Therefore, the fund achieved a periodic return within the limits of the certificate or a little less, but the original amount increased from 50 thousand to 60 thousand

What are the advantages and disadvantages of both certificates and investment funds for us as individuals?

Certificate Features:

Guaranteed zero risk return
Exempt from administrative expenses
You can borrow against it

Disadvantages of certificates:

The original amount will be frozen for the duration of the certificate, so you can’t benefit from it
You can’t often break it until after 6 months
If you break it before the end of the period, you will lose a part of the original amount equal to a part of the returns you received.

Funds Features:

Diversification in investments, and this is one of the main reasons for the relative rise of most of the actually existing funds in their returns over certificates in the long run.
There is an advantage of capital growth for the principal amount invested
Investment funds are considered a suitable entrance to invest in the stock market for individuals who do not have the experience and time to trade on their own
Ease of purchase and redemption because you can buy at the time you want and also redeem whenever you like according to the price of the document, whether at the time of purchase or the time of redemption

Therefore, when you are confused between investing in an investment certificate or investment funds, you must ask yourself how many questions like this

Do you need the amount yet?… Is it possible that you need it soon or is this an excess amount and you do not need it (if you need it after a short period, then the funds are better, but if you do not need it for the period of the certificate period, the certificates may be more appropriate in guaranteeing the return)

And if you do not know when you may need liquidity (determining the investment term), then the following rule can be followed:

The rule of diversification remains the basis, Don’t put all your eggs in one basket

The type of your investment is between certificates and funds, and even when you buy documents of investment funds of a type, once in a cash fund and once in a savings fund, and so on.

However, for institutions or companies to invest financial surpluses and temporary liquidity, cash / savings investment funds are considered the best investment.

As well as for private insurance funds, cash / savings investment funds are considered the best investment.

As well as for maintenance deposits for residential or industrial complexes, cash / savings investment funds are considered the best investment.