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Financial Dictionary - Investments


In an investment fund, since funds are assets without a legal personality, made up of individual contributions from different investors, when you invest in a fund, you do not acquire actual shares, but units in that fund. These units represent the investment made by each co-owner or unitholder, all of whom have owernship rights over the fund.

To invest in a fund, you must buy units of stock and this purchase transaction is called subscription. The transaction of selling units of stock to recover invested capital, with the corresponding loss or gain, is called redemption.

The price of each of the units is called the net asset value. This value is obtained by dividing the fund's assets by the total number of units issued. This value changes daily depending on the profitability of the fund's portfolio of assets.

What kinds of units of stock are there in an investment fund?

A fund's assets are held in common, but are divided into different units and these are grouped into kinds.

The different kinds of units are identified with an ISIN code consisting of 12 characters, the first two identifying the country and the following ones the corresponding security. These codes are unique international identifiers.

There are several different classifications:

  • Depending on the currency, they can be EUR, USD, etc.
  • Depending on the volume of investment, there are private, retail or institutional banking classifications.
  • Depending on the distribution of dividends, we have accumulation—also called capitalisation—funds, and distribution funds, which are the ones that distribute their dividends.

In addition to units in an investment fund, there are units of stock in a limited company. In this case, unit refers to each of the aliquots into which a company's share capital is divided.


How do funds work?

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Profiled funds

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