How to Invest in Funds: Complete Guide and Alternatives


How to invest in funds is a question repeated by many investors looking for alternatives to traditional investment models based on buying shares directly.

🥇 Active Investment funds
🎯 Types Indexed, monetary, fixed income and variable income
🔥 Popular managers Vanguard, Blackrock
💰 Minimum investment $ 5,000
⭕ Economic alternative ETF

Mutual funds are popular for reasons such as the following:

  1. They allow you to invest in assets in a diversified way
  2. It is possible to find options for practically any investor profile
  3. Apply a deferred tax model that may be interesting in some scenarios

But it also has some disadvantages to take into account such as commissions and costs that can significantly weigh down the profitability of the product.

An alternative is to invest in ETFs , through one of the best platforms on  the market such as eToro .

What are investment funds?

Mutual funds pool the money of various investors and give you a share in a portfolio of assets, which can include stocks , bonds , property, cash, or a mixture of them.

  1. The value of your investment rises and falls based on those assets.
  2. There are two main types of mutual funds: actively managed and passively managed.
  3. Active fund managers regularly make investment decisions on your behalf, such as which stocks to buy and when to sell them.
  4. Your goal is to outperform the market or a specific benchmark.
  5. Passive funds effectively follow a specific market or index in an attempt to match its returns.
  6. For example, the fund manager may buy all the shares of the ASX 200 index, in an attempt to emulate their performance.
  7. These funds, also known as follow-up funds, are cheaper to invest than actively managed ones.
  8. Exchange traded funds are an increasingly popular type of passively managed fund.

There are a wide variety of mutual funds, including those with assets that would otherwise be difficult to access, such as international stocks, commercial property, or infrastructure.

The value of mutual funds can go down or up, and there is no guarantee that an actively managed fund will outperform the market, and many do not.

We are talking about a safe investment with moderate economic returns.

When you invest in a fund you have to pay an annual commission to the manager. Although it may seem like a relatively small amount, it is very important to keep an eye on these costs as they can deplete your returns and cause your investments to underperform in the long run.

Learn to invest in mutual funds

To know how to invest in mutual funds, it is necessary to study the best books on the market. For the Spanish and Latin American market there are excellent solutions, such as:

  • Common Sense on Mutual Funds: John Bogle
  • The Four Pillars of Investing: William Bernstein
  • One Step Ahead of Wall Street: Peter Lynch

A widely practiced alternative is to participate in a trading course in order to learn how to invest in the stock market. In this case, the options available to us are essentially two:

  • Trading Academy
  • xStation

In the first case, eToro Trading Academy is a first-rate training center, with high-quality and very clear educational material, suitable for beginners.

There are also numerous Webinars conducted by the best financial experts, recommended to learn how to take your first steps in the world of investing.

The academy is free and to be part of it you just need to register with eToro in a few minutes


XTB offers another solution to learn how to invest with funds. This Broker takes great care of the educational section thanks to the section called xStation, with a large amount of material available to the client.

After studying the course, from basic to advanced level, the investment concepts will be much clearer and easier to put into practice.

By the way, a few tens of euros are enough to activate an account in XTB, a perfect way to put into practice all the notions learned without risking too much:


What types of investment funds are there?

The fund panorama is quite broad and complex, however we can select 5 different types to invest in, depending on our appetite for risk and the chosen time horizon.

1. Index funds

This type is the most requested especially by novice investors: the so-called index funds simply track the performance of an asset, usually an index.

Therefore, there is no real management or construction of a portfolio, since the replica of the Asset will simply be taken as a reference.

How to invest in index funds? Simply activate an account with specialized brokers such as eToro and trade with our favorite fund or ETF, with only 50 euros of initial investment.

2. Monetary funds

They are perfect funds to invest in the short term, since the interests accrue after 18 months. It is a safe way to park our money in a liquid and safe investment.

3. Fixed income funds

Ideal for any time horizon, they are Funds with debt capital within them, therefore mainly bonds and obligations.

They are very stable and volatility is low, making them ideal for those with a low appetite for risk.

4. Equity funds

Certainly more profitable than the types listed above, these funds focus on the best stocks in the world.

The level of risk is higher because stocks are volatile. However, if managed well, they can give investors good satisfaction and it is no coincidence that they are very similar to ETFs in terms of composition and profitability.

5. Mixed Fund

Another very popular type of investment fund refers to a combination of fixed and variable income.

In this case, the Manager must be good at balancing the two optimally, in order to ensure a high level of capital protection and at the same time satisfactory returns for all underwriters.

How to start investing in mutual funds?

There are different methods to start investing in funds, currently the most used is to go to the bank and ask for the list of negotiable funds. Through the banking operator or our financial advisor, we will thus invest in our favorite fund.

However, this method requires several costs, especially the remuneration of the bank (or consultant) for the service offered.

The alternative is to choose an online Broker that specializes in ETFs, similar to funds but without fixed costs. For example, eToro has been offering this service for years and today there are more than 14 million clients who use it every day to invest online.

Having clarified this aspect, what are the steps to follow to invest in Funds? Let’s find out in the following lines.

1. Define the strategy

In other words, we have to choose how much capital to invest and the time horizon within which we want to earn our interests.

Once these two aspects are clarified, it is advisable to use only funds that reflect our needs.

2. Read the information brochure

An aspect that many underestimate: it is always necessary to read all the conditions proposed by the fund. Especially in terms of costs and commissions, it is necessary to know precisely how much money we are going to spend on commissions.

Obviously, by relating everything to the expected returns, we will understand whether the investment will be convenient or not.

This aspect is also important to know all the return and transfer conditions, in case we decide to discontinue our investment early.

3. Open an investment account

As anticipated there are two options: bank or specialized Broker. We clearly recommend the second solution, as it does not have fixed costs but with the same security standards.

A broker regulated by the European Union, for example, must comply with the same conditions imposed on banks.

Even in terms of minimum deposit there are no comparisons: with eToro 50 euros is enough to activate an account, online and without risk, to start investing in the best Funds and ETFs selected by the Broker’s Managers.


In which mutual fund should you invest?

There are actually numerous investment funds through which to invest, online or through our financial advisor.

In this section we have selected the 4 most requested types of Funds , to offer a complete overview of what is needed to start investing and how much capital is needed.

1. Vanguard Funds

Vanguard Funds are among the most sought after and appreciated on the market. The motivation? Very simple, they are very well managed and offer returns that are often above the market average.

Vanguard is one of the largest investment firms in the world, offering hundreds of different index funds, suitable for all types of investors.

These Funds can be found on eToro, tradable online and with no fixed costs. To consult all the options that we have at our disposal, here is the link:


2. Blackrock Funds

Blockrock is also a very prestigious investment company with an asset of several billion dollars.

Their Managers over the years have consistently built highly successful Funds that are excellently reviewed by Morningstar. Again, eToro has decided to list the best Funds of this company, starting with a minimum investment of only € 50.


3. Vulture funds

Let’s change the typology and find out what the so-called Vulture Funds are. These particular hedge funds buy debts from insolvent or near bankrupt entities.

In this way they pay an asset at a price much lower than its market value and after having fixed it economically and financially, they resell it, obviously at a much higher price.

These funds have ended up in the eyes of critics because they have often bought houses from individuals unable to pay the mortgage, in part evicting them for purely speculative purposes.

To date, it is not possible to invest in mutual funds, as they operate independently and do not issue shares to individual investors.

4. Norwegian sovereign fund

Curious about how to invest in the Norwegian sovereign wealth fund? Unfortunately, this Fund is closed to foreign investors, as it has the sole task of managing Norwegian taxpayers’ money.

The curiosity is that since 1998, the year it was founded, the Fund has closed the year in negative only 5 times. Otherwise, the returns obtained were exceptional, so much so that they aroused the interest and curiosity of investors around the world.

In any case, this Fund represents an excellent example of professionalism and management, a true reference model for many other Managers in the world.

What do you need to know to invest in funds?

In this section we will answer a series of curiosities that many investors ask themselves before starting to invest.

How much to invest in a mutual fund? Let’s say that the amount varies depending on the chosen bank, however to deal with volatility it is advisable to invest at least 5,000 euros in a single fund.

For this reason, the cheapest alternative to ETFs (where € 200 is enough) is increasingly popular: the same operation as the Fund but with zero entry costs and commissions.

Which is better to invest in funds or stocks? As a matter of risk management, it is better to invest in a fund, as betting on a single share is too risky.

Again, the economical and profitable alternative is to create a portfolio of stocks with at least 10 stocks and optimize it day after day.

Is it a good time to invest in funds? Sure, markets are cyclical, so there is no perfect time. The difference in terms of profitability is given by the assets that make up the fund, chosen by the Managers.

A valid alternative is to trade ETFs in Brokers that allow short selling. In this case, if the market starts to go down, we can open a short trade and make money on its downside.

Advantages and disadvantages of mutual funds

The value of mutual funds can go down or up, and there is no guarantee that an actively managed fund will outperform the market, and many do not.

When you invest in a fund you have to pay an annual commission to the manager. Although it may seem like a relatively small amount, it is very important to keep an eye on these costs as they can deplete your returns and cause your investments to underperform in the long run.

There are a wide variety of mutual funds, including those with assets that would otherwise be difficult to access, such as international stocks, commercial property, or infrastructure.

The value of mutual funds can go down or up, and there is no guarantee that an actively managed fund will outperform the market, and many do not.

When you invest in a fund you have to pay an annual commission to the manager. Although it may seem like a relatively small amount, it is very important to keep an eye on these costs as they can deplete your returns and cause your investments to underperform in the long run.

What alternative to the Funds? ETFs

The ETF (Exchange Traded Funds) are investment funds innovative passively managed and traded on the stock exchange as simple actions. Their characteristic is related to the fact that they replicate the performance of the Assets present in them (stocks, bonds or commodities).

How do ETFs work? Let’s say right away that ETFs replicate their Benchmark on our account in a very accurate way.

What is it about? The benchmark represents, for example, a set of stocks, which can be an index or a series of well-selected, low-risk stocks on the stock market.

So, in simple terms, an ETF is essentially an index or the benchmark of a set of stocks or other investment instruments.

Investing in ETFs is one of the best options you can make: more profitable than deposit accounts and less expensive than bonds.

The advantages of ETFs are numerous, we have already seen some of them, such as the possibility of diversifying “squared”.

  1. Here is a list of the main benefits of investing in ETFs:
  2. Absence of incoming and outgoing commissions
  3. Possibility of collecting dividends
  4. Real time trading
  5. In short, everything an investor needs to better manage their funds

Surely a question that many of us have asked ourselves: what are the risks of investing in ETFs?

Apparently quite similar to the risks one takes when making any financial investment. In essence, over the years, ETFs have proven to be less risky on average than similar alternatives, such as mutual funds.

The motivation is twofold:

  1. ETFs simply copy an underlying asset, which is already widely diversified
  2. There is no active management of the Fund, human errors are limited

In general, we are talking about instruments certified by all the most important regulatory bodies and with a very wide use worldwide. Investing in exchange-traded funds is certainly a good idea to make a good, solid and profitable investment.

Where to invest in the best ETFs? To find the best services when investing we must look for the best stock brokers. It will be about regulated and certified brokers that will prevent us from giving them our money in unsafe environments.

This implies operating with platforms that are the best. To trade ETFs it is interesting to look at the eToro proposal.

It is a regulated platform, in Spain it has been registered with the CNMV, and it has millions of users with long market experience.

This platform can currently offer more than one hundred and a half exchange-traded funds, which is also constantly updated and growing. Through a simple click, the investor can access this investment model in a safe and reliable environment.


Among the main characteristics of this broker we must highlight:

  1. Some Spreads low competitive
  2. Many assets to invest, from stocks to cryptocurrencies, currencies, etc.
  3. A proprietary automated investment system called Copy Trading .
  4. A demo account without functionality limitation to operate with virtual money for free
  5. Access to real money operations from a minimum deposit of € 200

The broker operates on a very comfortable and accessible web platform. It is ideal both for those who are new to investing and for veteran users who will find all the necessary tools for investment.

eToro also offers its users access to a demo account. Demo accounts allow the user to test all the functions of the platform without risking their own money. It operates with virtual money and they are very useful to learn and improve investment strategies.



Throughout the guide we have tried to define what mutual funds are , their advantages and disadvantages, and the alternative that ETFs represent.

It is a financial product that allows you to invest in different types of stocks and markets. Due to its own characteristics, it is a very diversification-oriented product. Among the different types of funds that exist, there are those aimed at almost any possible investor profile.

For their part, ETFs, which can be traded in the best stock brokers, offer a different alternative, in which, with passive management generally, they try to replicate the performance of an asset that can be stocks, bonds or others.

It is a different and growing model that attracts many investors.

To operate this type of format it is important to choose a good platform. With eToro it is possible to trade without commissions and with very low margins for BID and ASK prices. It will also be possible to practice with a Demo account to evaluate the goodness of this platform with your own eyes.

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