Collective Investment Schemes pool the money of many investors to professionally manage large portfolios of securities. These securities may include shares, debt securities, money market securities or a combination of any of these. Each investor holds a share (units) of the portfolio and they are entitled to the dividends and gains (or losses) that accrue to the securities in that portfolio.
The Investor benefits from the following:
- Professional Investment Management. Collective Investment Schemes hire full-time investment professionals to manage the investment portfolios. These managers have real-time access to crucial market information and they are able to execute trades in a very quick and cost-effective manner.
- Diversification. Collective Investment Schemes invest in a broad range of securities. This limits investment risk by reducing the investor’s exposure to a possible decline in the value of any one security.
- Low Cost. Collective Investment Schemes allow investors to participate in diversified portfolios at a relatively low cost.
- Convenience and Flexibility. An investor would invest in a single fund and yet they enjoy the benefits of a diversified portfolio with a wide range of services. Fund managers are also charged with the responsibility of deciding what securities to trade and they ensure that dividend payments are received and investor rights are exercised.
- Liquidity. Collective Investment Schemes allow you to get your money back in a prompt manner at the relevant market related prices.
- Transparency. You get regular information on the value of your investment and you may be able to obtain information on the specific investments that are made by the Collective Investment Scheme.