A follower of mine asked me the following yesterday:

“I’m thinking about investing in funds. Do you share anything on this?”
I promised them that I would research it and explain as simply as possible. In this post, I’ll try to cover at a basic level what an investment fund is, what you should look at when choosing one, and how a portfolio “basket” could be built.
What is an investment fund?
An investment fund is where your money is allocated by a professional portfolio management team into investment instruments such as stocks, gold, bonds, foreign assets, and similar investment tools.
Let’s give a simple example:
1,000 people invest 10,000 TL each, and a fund with a total size of 10 million TL is formed.
This money is managed by professional fund managers. Depending on market conditions, the manager can buy and sell stocks, gold, bonds, or foreign assets.
In return for the amount you invest, you receive fund participation units. As the fund’s value increases, the value of your units also increases.
One of the important advantages of investment funds is that they can distribute risk without being tied to a single investment instrument. You can start with smaller amounts, and the obligation to monitor the market every day decreases. This also limits, to some extent, emotional decisions such as selling out of fear or making impulsive buys driven by excitement over rising prices.
A significant portion of investment funds in Turkey can be compared via TEFAS and purchased through a bank or brokerage firm.
What types of funds are there?
The most important point here is that not every fund is the same.
1. Money market funds
They are generally in the lowest risk group. The fund’s portfolio consists of short-term and liquid interest-bearing products.
They are mainly considered for:
Money you plan to hold for a short time,
Emergency savings,
Investors who prefer lower risk.
2. Debt instrument funds
They invest in government bonds, bills, and private sector debt instruments.
Their return potential may be higher than money market funds. However, they are affected by changes in interest rates.
3. Stock funds
A significant portion of their portfolio consists of stocks.
They may offer high return potential in the long run. On the other hand, their fluctuations and temporary loss risk can also be higher.
4. Gold funds
They provide the opportunity to invest in changes in gold prices without buying physical gold.
When gold rises, the fund’s value generally rises as well. But if gold prices fall, the fund can also lose value.
5. Foreign stock funds
They invest in companies in US, European, or other country markets.
A fund portfolio may include companies such as Apple, Microsoft, Nvidia, or Amazon. However, each fund’s portfolio composition and investment strategy differ.
6. Thematic funds
They focus on a specific sector or investment theme.
For example, you can find thematic funds that invest in:
Artificial intelligence,
Technology,
Energy,
Defense industry,
Healthcare.
These funds may have high growth potential. But because they concentrate on a specific sector, their fluctuations can also be high.
The biggest mistake when choosing a fund
Many investors start with this question:
“Which fund has made the most over the last year?”
Then they buy the top fund on the ranking.
But past performance does not guarantee future results.
A fund might have gained 150% last year. However, in the next year it could lose 20% or more in value.
That’s why you shouldn’t choose funds based only on past returns.
What do I look at when selecting a fund?
1. I first determine my investment goal
When do I need the money?
In three months?
In three years?
During retirement?
Fund selection should be made first based on the investment horizon and the target.
2. I examine the risk value
Fund risk values are usually shown on a scale of 1 to 7.
1–2: Low risk
3–4: Moderate risk
5–7: High risk
However, high risk does not mean guaranteed high returns. It only indicates that the fund may experience more severe fluctuations.
3. I look at what the fund invests in
The key question is:
“What assets are inside this fund?”
Because when you buy a fund, you effectively become a partner in the assets the fund invests in.
You should examine the portfolio allocation and investment strategy more than the fund name.
4. I evaluate the fund management
I look at which portfolio management company manages the fund, the history of the management team, and the consistency in the fund’s strategy.
Changes in management and major shifts in strategy can also affect the fund’s future performance.
5. I review the management fee
Each fund has a management cost.
Even if this ratio seems small, it can affect total returns in the long run. When comparing funds with similar structures, you should also consider management expenses.
6. I look at the fund size
Fund size alone is not a sign of a good or bad fund.
However, in very small funds, investor flows and liquidity conditions may become more important. In large funds, management flexibility may sometimes decrease.
So, I evaluate fund size together with other criteria.
How do you understand whether a fund is good?
You don’t look only at how much it has made.
These questions should be evaluated together:
Is it more successful than other funds in its own category?
Was that success over one year, or a longer period?
How much risk was taken to achieve the return?
How much did it fluctuate, and what was the maximum drawdown?
Is the performance stable?
Has it managed to beat the benchmark?
In professional analysis, what matters is not just gains, but the return achieved in exchange for the risk taken.
Is all money invested in just one fund?
Usually, no.
Diversification is one of the most important rules of fund investing.
This is only an example. The goal is to ensure the portfolio moves more evenly under different market conditions.
Each investor’s proportions differ depending on age, income situation, investment horizon, risk appetite, and goals.
Two basket approaches based on risk appetite
Aggressive growth-focused basket
For investors who think long term and can tolerate higher volatility, the stock weighting can be kept higher.
A basket may include these fund types:
Domestic stock fund
Foreign or global stock fund
Gold fund
Money market fund
While domestic and foreign stock funds form the growth side, gold diversification and money market funds can be used for liquidity and waiting for opportunities.
More balanced basket
For investors who want to keep volatility more controlled, the stock weighting can be reduced.
In this approach:
The proportion of the domestic stock fund can be lowered.
A limited allocation can be given to foreign stock funds.
The proportion of the gold fund can be increased.
The weight of money market or short-term funds can be raised.
This structure may have lower growth potential than an aggressive basket. In return, it is expected to move more calmly during downturn periods.
What else should be considered when choosing a fund?
Along with returns, you should also examine:
Risk value
Management fee
Fund size
Number of investors
Portfolio allocation
The strategy being understandable and consistent
Buy and sell settlement (valör) dates
Current withholding tax practice
Past performance is only a reference; it does not guarantee that the same return will be achieved in the future.
How do you get started?
From a bank or brokerage firm app, you can reach TEFAS funds and review the relevant fund types.
Starting with a small amount and learning the system may be healthier.
Investing regularly every month can reduce the risk of buying from a single price level. However, regular investing is not a guarantee of profit. Buying an incorrectly chosen fund regularly doesn’t automatically make the investment the right choice.
In the early period, it’s more beneficial to focus on your investment goal, portfolio allocation, and the defined plan rather than checking the fund price every day.
My most important advice for beginners is this:
Fund investing isn’t just about finding the fund that makes the most money.
The real goal is:
To recognize yourself and your risk limits,
To set your investment target,
To build an appropriate basket,
To act regularly and with a plan,
Not to buy or sell in panic,
To think long term.
A good investor is not the one who constantly changes funds, but the one who knows why they bought that fund.
While doing the research, I saw that the topic is quite detailed. Whenever I get the chance, I’ll keep explaining fundamentals and also reviewing the funds one by one.
This post is for general information purposes and is not investment advice. Every investor’s financial situation, goal, investment horizon, and risk tolerance are different. Before choosing a fund, you must definitely consider your own circumstances.