Every new investor is faced with a myriad of questions when a decision is made to invest directly into stocks and shares.
- How much is affordable?
- Is a large amount of money needed?
- How much risk is involved?
- What level of risk can be tolerated?
- Which stocks should be bought?
- Which countries should be focused on or avoided?
- What about exchange rate risks?
Furthermore, to many individuals the world of investments is a minefield of jargon, unknown risks and potentially high costs. Collective or pooled investment funds allow an investor to access the stock market in a diversified manner with the help of a professional investment management company. The investment decision sare made by the investment fund manager, thereby alleviating some of the investor’s queries or concerns regarding individual shares.
What is a pooled investment fund?
Very simply, a pooled investment fund is a vehicle that allows a number of investors to pool their investments together as part of a collective investment scheme.This fund is placed under the management of a recognised investment manager who has access to a wide range of stocks (and other assets) that may not be available to the individual investor.For each fund an investment objective is set,outlining the areas into which the fund is permitted to invest, its capital growth and income potential,and the level of risk an investor should expect.
Very simply, a pooled investment fund is a vehicle that allows a number of investors to pool their investments together as part of a collective investment scheme.This fund is placed under the management of a recognised investment manager who has access to a wide range of stocks (and other assets) that may not be available to the individual investor.For each fund an investment objective is set,outlining the areas into which the fund is permitted to invest, its capital growth and income potential,and the level of risk an investor should expect.
The pooling of relatively small amounts of capital under a common investment objective creates a number of advantages to investors:
Access
- Investment funds give even the smallest of investors access to a wide range of investment opportunities.
- Investment funds offer the benefits of diversification of investment, expert investment management and access to overseas and specialised markets.
- The pooling of assets creates efficiencies,leading to lower transaction costs.
Flexibility
- The wide range of investment funds available easily accommodates the majority of investor objectives.
- Both regular payments and lump sum investments are available so you don’t have to wait until you have a large sum to invest.
- As investment funds are normally priced on a daily basis the investor can buy and sell his/her stake in a fund at any time.
Understanding
- Performance information on investment funds is readily available and can be compared to other, similar investment funds.
- An investor knows what he/she is purchasing as every pooled investment fund states a clear investment objective.
- Authorised pooled investments normally fallunder the supervision of a stringent regulatory environment, set up to protect the investor.