The main types of financial trust management

Trust management of financial assets according to the peculiarities of the transfer of rights can be of the following types:

full control - when the manager acts independently, buying or selling shares and securities in accordance with his own strategy, agreeing with the investor, and then contacts the client and notifies him in writing of the actions performed;

management by agreement - when the manager coordinates each of his actions with the client in writing;

Management by order, when the manager acts only at the client's order.

According to the investment instruments, trust management can be classified into the following types:

• Mutual Funds (Mutual Investment Funds);
• ETF (Exchange Traded Funds);
• PAMM-accounts;
• Copy Trading.

Let's take a closer look at each of these types.

ETF

ETFs (Exchange Traded Funds) are exchange-traded funds. The need for these funds is caused by the fact that it is difficult to buy securities of foreign companies. First, it requires an intermediary (a broker, an investment fund, or a company). And secondly, securities are quite expensive. For example, one share of Amazon is worth more than $1,000, and it would take a large investment to put together a serious portfolio of different securities.

Exchange-traded funds were originally invented by foreign investment companies and banks. Such funds were called ETFs. They allow you to invest in a broad range of foreign securities, while open-end mutual funds usually have fewer assets.

Exchange-traded funds more often are index funds. That is their trust management funds simply invest money in a predetermined list of assets in a strictly defined proportion - these will be the same assets in the same proportion as in the index to which the ETF is linked.

Some ETFs are traded on Russian stock exchanges. They are called exchange-traded mutual funds (ETFs).

PAMM-accounts

PAMM is a method of investing, in which investors get an opportunity to earn, not trading independently on the currency or stock market. This method is perfect for beginners who have not yet developed their own strategy and are still learning, but do not intend to lose time and can now make a profit.

Investors invest funds in PAMM accounts, and the experienced trader carries out the trade, opening, and closing transactions according to his strategy. This type of cooperation between the manager and the investor is mutually beneficial because the trader receives compensation for the management of investments.

Opening PAMM accounts is possible with the help of brokerage companies, which control the observance of trading rules and ensure that the invested sum is available for withdrawal only by the investor. The possibility to withdraw funds is fixed only for the investor, and the manager, although he manages these funds when trading and investing, he cannot withdraw them.

Copy trading

Copy trading as a method of earning is rather popular among traders and investors. It refers to the methods of passive trading, that is, you are not required to conduct trading activities and follow the market trends in order to open and close transactions in time. Trading is conducted by an experienced trader on his account and with his own funds, and you simply copy his transactions directly into your personal cabinet along with any parameters you specify.

Many brokers make such trading possible. You can choose a brokerage company with the best trading conditions and an excellent reputation. This will provide a guarantee of compliance with trading conditions and reliability of trading.

To start copying, you should choose a trader with the best trading conditions by evaluating his profitability, the number of successful trades, and the number of traders already following him in the comparative characteristic provided by the broker. Then using a special service you copy all or part of his transactions.

Mutual funds

Mutual funds are the most affordable type of asset management suitable for novice investors. It is characterized by small commissions and a low entry threshold.

A mutual fund pools funds (units) of many trustees at the same time to invest them in profitable assets: stocks, securities, bonds, or real estate. Each fund has its own investment declaration, which indicates the share of funds invested in each instrument. You can read the declarations of the different funds to choose the best option and buy shares in them.

You may invest at least 100 roubles in the fund, the commissions for asset management in unit investment funds are small, starting from 0.2% of the value of your units. At the same time, the yield is often 1.5-2 times higher than the deposit rates. True, when selling units, the management company takes an additional commission of up to 3% of their price.

The more successfully the management company invests funds, the more expensive the units become and the more you earn when selling them. However, it should be borne in mind that if the investment is unsuccessful, the units will immediately become cheaper, and investors will lose their money.

Also, if you want to use all available trading tools to increase your capital as soon as possible - follow this link below, or contact us via live chat. Our experts will help you to choose the best strategy for success.