What is a leveraged fund? / Making profit based on the laws of physics! – Tejarat News

According to Tejarat News, as mentioned in the previous reports, one of the ways to earn profit in the capital market is to use investment funds. It is especially recommended for people who don’t have the time or specialized knowledge to invest in the stock market to go for investment funds.

There are different types of investment funds in the market, each of which gives benefits to investors according to their nature; In other words, according to the risk of the fund, each fund may give a certain profit to the shareholders.

What is a leveraged fund?

Leveraged funds are considered one of the most profitable stock exchange funds. This type of fund multiplies investment returns by using the leverage mechanism.

A leveraged fund is a type of investment fund that uses the financial leverage technique to obtain double returns from an investment. This fund simultaneously uses two mechanisms of “issuance and cancellation” and “exchange-traded fund (ETF)” for investing and transferring ownership of units. The mechanism of the type of units of this fund is related to their risk level.

In stock funds or non-leveraged funds, the total assets of the fund include the money obtained from the sale of fund units, and the management of these funds buys shares in the financial markets with this existing asset. By creating creativity in asset management, this mechanism was changed and leveraged funds were formed.

Basically, leveraged funds, by using the leverage technique and by buying each unit of it by the investors, give the fund manager the possibility that in addition to the capital, the investors can also use bank facilities and buy shares with an amount more than the fund’s assets and create Invest portfolio.

Investment funds invest in a basket of different assets, depending on the type of activity, risk and yield, and leveraged funds are no exception to this rule, and a major part of their portfolio consists of stock exchange shares and preemptive rights of these shares.

But as the name of this fund suggests, it may sometimes result in losses for its investors. Basically, a lever in physics is a tool that gives more feedback and makes work easier by spending the least amount of energy. In financial science, leverage is similar to this definition, and leverage allows investors to invest with an amount greater than the initial asset.

As a result, by relying on the science of physics, nosats have a significant impact on these funds, and the investor may cancel his transactions with profit or loss.

Types of leveraged funds

There are two types of leveraged funds, and risk-taking and risk-averse people can invest in this fund. In the first type, it means the normal type of fund and premium units.

• According to statistics, the risk of normal funds in different companies is between 15 and 30 percent, and according to the market situation and investment returns, this risk can increase or decrease.
• Premium units also have the highest risk and the investor of these funds should keep in mind that he will take the highest risk and profit by using leverage. (Some companies only invest in one type of leveraged fund, and others have two types of these funds.)

There are two types of premium units: general premium units and special premium units;

• The general premium unit is designed for risk-taking investors and has the ability to buy and sell in the capital market. The owners of these units do not have the right to vote in the management of the fund.
• Special premium units are also for fund founders. It means those who have the right to vote in the fund assembly. In addition, the transfer of special premium units has special conditions.

Advantages of leveraged investment funds

• Calculation of profit in daily basis
• Higher returns for risk-taking investors
• Guaranteed profit
• Existence of high-risk and low-risk units
• Indirect profit

In general, it should be said about leveraged funds that these funds provide profits to their investors by relying on a lever. Of course, according to the laws of physics, the trend of leverage may sometimes be downward and sometimes upward; Therefore, these funds are suitable for risk takers.