There are many individuals who have similar risk and return objectives as it relates to investing. Mutual Funds are a medium to facilitate the management of money brought in by individuals who would like their funds managed in a similar fashion.
For simplification purposes, let’s say we have 5 individuals, all with $20,000 to invest and all of whom have a conservative risk profile. Assuming these 5 individuals invest their $20,000 into a Mutual Fund with a conservative mandate, the pool of investments now becomes $100,000. This $100,000 will be invested by the Fund Manager in a diversified portfolio of investment securities which will spread investment risk. This ‘diversification’ concept is more commonly known as ‘not placing all your eggs in one basket’.
The persons who have invested in the Mutual Fund will now be called Unit Holders and will partake in the performance of the entire portfolio.
The Mutual Fund market continues to grow in popularity in Trinidad and Tobago. As at 31st December 2020, the Mutual Fund market held over TT$59MM in Asset under Management via 69 registered Mutual Funds and 15 issuers. Across the globe there has been over USD$21Tr invested in USD Mutual Funds between the years 1998 and 2019.
Source: TTSEC.org, statista.com
Benefits of Investing in a Mutual Fund
With a small investment size, Unitholders can obtain exposure to a wide range of investment securities.
Unit holders are privy to a team of Financial experts manging their money
Open ended Mutual funds in most instances allow Unitholders to withdraw cash from the portfolio on demand.
Mutual Funds are governed by the Collective Investment Scheme (CIS) Guidelines of Trinidad and Tobago.
Prepared by: Keshala Mahabir
Wealth Management Associate
Maritime Capital Limited