A person who owns units in a fund  A fund is a “pot” into which investors put money. This is invested by the fund management in various securities, such as shares or bonds, based on certain criteria. This means good diversification can be achieved even with a low level of investment. There are various types of funds: if a fund invests in shares, it is called an equity fund. Real estate funds invest in property. is, depending on the fund, also participating in the performance of various securities, generally speaking shares  A share is a security which gives investors a stake in a company. Companies raise capital by issuing shares. Shareholders have proprietary rights (e.g. entitlement to dividends) and membership rights (e.g. entitlement to take part in the general meeting and the right to vote). and bonds  A bond is a security that generates interest for investors. In addition to entitlement to payment of the agreed interest, bond holders – the creditors – also have the right to repayment of their capital. A government bond is issued by a state. The state, the Swiss Confederation for example, is the issuer of the bond and therefore also the debtor.. These provide investors with all sorts of profits, for instance in the form of dividends  The portion of a company's profit that goes to its shareholders. and interest  Interest, also known as coupon in relation to bonds, is not dependent on earnings before tax and is normally paid out once a year.. Here is an overview of the types of payment you can expect as someone who owns fund units or securities:

Dividend: company profit for shareholders

The share of a company's profit that goes to the shareholders is known as the dividend. The dividend sum depends on how much net profit is made, and how many shares each shareholder holds. A fixed sum is paid out for each share. Each year, once net profit has been made, the dividend is distributed amongst shareholders shortly after the General Meeting (GM). If, however, a company has made no profit, then the shareholders too generally come away empty-handed, that is unless the company decides to use its reserves to pay out a dividend. In the article “Why shares are worthwhile”, you will find out why it’s worth investing in shares.

Interest: yearly payments for bondholders

A person who owns bonds is entitled to interest. Unlike dividends, interest does not depend on profit, and is already set when the bond is issued by the issuer. Interest is also known as coupon  The coupon refers to the fixed interest rate received annually on a particular date for a bond. and is generally expressed as a fixed percentage of the nominal amount  The nominal amount, also known as the nominal value, is the amount a debtor borrows from a creditor. The nominal amount indicated on a bond is the value paid out to the investor at maturity.. The coupon is paid out once a year. This makes bonds quite similar to a savings account: a fixed percentage of interest is paid on an amount, and then paid out at the end of the year.

Yet there are bonds where the interest is not paid out on a yearly basis. You can find out more in the article “What are the most common types of bonds?”

Returns: ways to compare various investments

Return  The overall performance of an investment compared to the capital you as an investor have invested in it. is a key concept that frequently crops up in investment. It is a useful gauge for comparing various financial investments, i.e. bonds and shares. The return refers to the overall success of an investment compared against the capital you as an investor have deployed. With a share, for instance, you calculate the average return by subtracting the price of the share at time of purchase from the current price of the share, adding the dividend, and you then divide everything by the initial price of the share. The initial price of a share is often known as the purchase price, and comprises, in addition to the purchase price itself, all additional costs, such as fees. The purchase price varies depending on how many shares an investor buys. In the case of a fund, the return is comprised of revenue (dividends on shares as well as interest on bonds and exchange gains) in addition to any price variations on those assets in the fund.

Distribution: payouts for fund owners

In the event of distributions, interest and dividends once again play a role. If you are investing in an accumulation fund  Fund income, such as dividends or interest from the securities held in the fund, is directly reinvested in securities by accumulation funds., the revenue from each investment position will be invested back into the fund, in other words not distributed. The interest on a bond or the dividend on a share are not paid out directly to you, but reinvested on an ongoing based back into the fund assets. With a distributing fund  Fund income, such as dividends or interest from the securities held in the fund, is paid out to investors by distributing funds according to the number of units they have. This usually takes place once a year. this revenue is paid out to the shareholder. This means the investor receives the fund income, which can be paid out either once a year, once every six months or once every three months.

By familiarizing yourself with these key profit terms, you will be able to classify profit from funds and securities more effectively, and you will be able to compare different investments with ease.