On 19 April we celebrate World Funds Day

 

The history of the mutual fund can be traced to the late 18th century in Amsterdam. In 1774, Abraham van Ketwich was merchant of the Netherlands and offered business partners a diversified pool of securities specifically designed for citizens of modest means. He called it “Eendragt maakt magt” or “unity creates strength”. The idea of investment funds was born.

His concept was simple and very similar to the present day fund. By investing in bonds issued by foreign governments and banks, as well as in plantation loans in the West Indies, he spread risk among various asset types.

The success of his first fund lead to the introduction of a second issue in 1779. He called it “Concordia Res Parvae Crescunt” or “By concord little things grow”. Van Ketwich’s fund existed for 114 years and officially dissolved in 1893.

Pooling resources and spreading risk using closed-end investments soon took root in Great Britain and France, making its way to the United States in the 1890s, creating a dynamic, which is still present these days.

For almost 250 years broad risk diversification represents a success criterion for investments. For this reason Abraham van Ketwich is considered the originator of mutual funds. In honor of his birthday – the 19 April – we celebrate the World Funds Day.

 

Risk mitigation

The principle of risk diversification is a central aspect of investment funds. By diversifying, a loss on one type of investment may be balanced by a gain on another. Spreading your risk across different asset classes means you are less likely to suffer a big loss just because one sector of the market is doing badly for a while.

Experienced fund managers at Erste Asset Management spend the whole day watching the movements of every type of investments. Because this is their primary occupation, they can devote considerably more time to selecting investments than an individual investor.

 

Investing in mutual funds offers a number of advantages:

  • You can invest any amount. Start with just 100 RON!
  • You have access to your money at any time. You can buy and sell fund units whenever you like.
  • Funds are managed by experienced fund managers, so clients do not need to make investment decisions themselves.
  • Transparent information makes sure, that every clients can follow investment decisions from our fund managers.