Which fund should you choose?
There are a number of things you need to consider when choosing a fund.
Investment period
Your reason for saving and the period of time you intend to save for are the most important questions. Long-term investments can often be incompatible with short-term goals.
The investment period is a key factor when considering a fund. The investment period is an indicator of the ideal investment period or the period most likely to give you the best possible return on your investment.
Risk tolerance
What is the aim of your investment? Do you simply want to maintain the balance, minimise fluctuations or do you want to increase the long-term value of your investment?
Risk tolerance is an important factor when considering the different fund options. Risk and gain often go hand in hand; the higher the risk, the higher the potential rate of return.
Bank deposits and government guaranteed bonds are generally considered low risk whereas shares are often higher risk. Distributing your assets is still considered the best way to secure a higher rate of return with low risk in the long-term.
Fund type
Investment periods differ between funds. The investment period and risk tolerance are indicators of the most suitable fund.
- Liquid funds: Mostly invest in deposits and short-term bonds and bills of exchange. The investment period is generally short (one week or more).
- Bond funds: Mostly invest in bonds. Bonds can be indexed or non-indexed and with or without government guarantee. Fluctuations are generally low and the rate of return is mostly steady. The investment period varies but is generally three months or more.
- Share funds: Mostly invest in in domestic or international shares. Fluctuations may vary and the risk is generally higher in order to potentially secure a higher rate of return. The investment period is long-term and is generally 5 years or more.
- Mixed funds: Focused on distributing assets and risk by investing in a variety of options such as shares, bonds and deposits. Mixed funds ensure different asset classes.
- Indexed funds: A fund that invests in the exact same securities as a given index. They distribute assets, represent a cross-section of bonds and running costs are generally low.
Disclaimers
General disclaimer regarding Private Pension Plans
Investments in financial instruments always entail financial risks, such as the risk of little or no return or total loss of capital. Past performance is neither an indication nor a guarantee of future returns. Risk increases if the investment is financed by credit and returns can increase or decrease due to exchange rate volatility if assets are in foreign currency. Taxation of Private Pension is assessed on an individual basis in accordance with current legislation and is subject to change.
Framtíðarauður is a Private Pension Fund in accordance with Act No. 129/1997 on Mandatory Pension Insurance and on the Activities of Pension Funds. Íslandsbanki is the custodian of Framtíðarauður. Investors are advised to familiarise themselves with the rules of Framtíðarauður and the different strategies of each investment plan.
Information on this site is intended for information purposes only and should not be considered as an offer or advice on the purchase, sale or other allocation of certain financial instruments. Íslandsbanki is not responsible for investment decisions made based on information on this site. The source of this information is considered reliable, but the accuracy or validity of the information cannot be guaranteed. The bank reserves the right to make changes to this information at any given time.
Exchange rate developments and returns
The annual administration fee is included in the daily calculation of each investment plan’s exchange rate. Return for 12-month periods or longer is calculated on an annual basis. Shorter periods are not calculated on an annual basis but show price change instead. Return is based on the latest price listed and portrayed in the base currency of each investment plan.