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Tutorial: Equity funds

What are equity funds?

Equity funds are shares funds investing continuously a minimum of 66% of the fund assets in stocks and stock instruments; they can also complete their portfolios with money market instruments or bond instruments. In the long term, however, the share of stock instruments in the portfolio is close to 100 %. Stocks as well as equity funds rank among most yielding investment instruments, which unfortunately is also connected with corresponding risks. Stocks show a higher fluctuation rate and therefore equity funds rank among risky investments as well. They are best for long-term investments, for 5 and more years, and for investors willing to tolerate major fluctuations of the investment value, the funds offer the opportunity to achieve a higher yield than bond or balanced funds. Equity funds are very good for long-term investments on a regular basis, which reduces the risk of their improper timing. When creating a long-term investment portfolio, equity funds should never be omitted, they should even appear even in a conservative portfolio, in percentage units.

How do equity funds work?

Equity funds are widely diversified stock portfolios, investing in numerous (tens of) equitys, by which they reduce the risk of drop of an individual stock title significantly. They form the most varied category of shares funds, because various investment strategies can be applied with them and variety of stock markets can be used. Pursuant to investment strategy, they can be divided into benchmark funds, copying the particular market or index, stock-picking funds, searching for investment potential of individual companies, or equity funds of funds, investing in investment certificates of other equity funds. Pursuant to their focus on developed or developing economics, they can be divided into various territories (Europe, Asia, etc.) or specific countries (the Czech Republic, USA, Japan, etc.), and into individual economic sectors (technology, pharmaceuticals, energy, etc.).

Your advantages

  • High liquidity – fast payout of money without penalties
  • If the recommended investment horizon is kept, it is possible to achieve a higher yield than with bond or balanced funds
  • Wide diversification of fund portfolios up to tens of titles, reducing the risk of drop in the investment value
  • Wide selection of equity funds pursuant to their focus and investment strategies
  • Either lump sum or regular investments
  • High transparency

You should know

  • Equity funds are optimum funds for regular long-term investments which reduce the risk of their improper timing
  • Equity funds should be represented in every investment portfolio with a long-term investment horizon, and their proportion depends predominantly on the perception of market risks
  • The more conservative long-term investment portfolio, the smaller share of equity funds it should contain
  • Guaranteed funds are collective investment funds
  • The value of investment in shares funds can go up or down, and return on the amount invested is not guaranteed
  • All details on shares funds and risks connected with investments in the funds, including information on the investment company managing the fund, are provided in the Fund Statute


Purchase conditions

Who can buy?

  • Citizens of the Czech Republic or foreign nationals over the age of 18 years (legal representative in the case of a minor)
  • Legal person, natural person–entrepreneur
  • Other entities established under the laws of the Czech Republic (foundations, movements, political parties)

What documents should be signed by the client

  • Investment adequacy questionnaire
  • Contract for the provision of purchase and sale of securities issued by the subjects of collective investment
  • Contract for the opening and management of investment instrument asset accounts

What is needed for signing the Brokerage Contract

  • Natural person
    Valid identity card (ID card or travel, diplomatic or service passport, residence permit)
  • Legal person
    Proof of legal personality – an extract from the Commercial Register (original or certified copy) not older than 3 months, and proof of entitlement to dispose of share certificates signed by representatives
    Document to verify identity (natural persons – e.g. company executive)
  • Other entities
    Proof of legal personality, which is issued by the appropriate authority that either approves or registers their activities. And here, there are no 3 months... isn't it possibly discrimination?



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