You’ve probably heard of pooled investment funds, but may not understand the details or know whether they’re a smart financial decision for you. Read on to learn more about how they work, their benefits, and important questions to ask before investing.
How Pooled Investment Funds Work
Pooled investment funds are usually large funds built by aggregating relatively small investments from individuals. A professional fund manager (or a team of fund managers) determines which assets to invest in and then purchases accordingly. Other types of managed funds include stocks, real estate, and mutual funds. Pooled funds provide an opportunity to invest for those who may not be able to do so on their own due to constraints concerning budget, resources, or expertise.
The Benefits of Investing in a Pooled Fund
There are several benefits of buying into a pooled investment fund:
- Professional Fund Management: Experienced fund managers take on the due diligence of deciding which assets are likely to provide a high return on investment, as well as when to buy and sell.
- Diversification: Pooled funds are a great way to diversify your portfolio and reduce risk, since your investment is spread across multiple assets.
- Negotiating Power: When multiple investors come together, they have increased negotiating leverage to purchase the assets they want at the price they want.
Questions to Ask Before Investing
Investing your money is a big commitment, so be sure to ask these important questions before making your decision:
- Who are the fund managers and what experience do they have? Look for professional fund managers who have experience in the industry and a proven track record of delivering results.
- What is the fund made up of and how are the investments chosen? You’ll want to ensure that the fund managers have done their due diligence in selecting assets that are likely to provide a favourable return on investment.
- What is the risk level and how long is the investment term? Make sure you’re comfortable with the length of time you’re committing to the fund, as well as the potential risk involved.
- What are the fees? Ask about the fees upfront so there won’t be any surprises down the road.
Pooled funds can be a very rewarding investment, as long as you do your research in choosing the right fund for you.
DMCC Holdings unlocks value and creates exceptional returns with our investors through commercial property in the U.S. and Canada. Get in touch with us to learn more.
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