What is a mutual fund?
A mutual fund is a relatively mature and well-established investment vehicle. Managed by portfolio managers, mutual funds are investment schemes that pool together capital from different investors and then invested in various types of asset classes including equities, bonds and money market instruments. The holdings could cover dozens of securities.
Advantages of mutual funds
Ease of access
Once you have set your investment goals and risk appetite, you could open an investment account and select the appropriate funds. Going forward, you could review your investment regularly based on your goals, risk appetite, personal needs and circumstances. Mutual funds could be an accessible way of investing your capital.
Tapping professional expertise
Portfolio managers generally have the expertise and experience managing investments. Retail investors could harness their robust research, risk management capabilities and market insights. The managers could also help with fund administrative tasks such as settling a trade, foreign exchange and dividend-related matters.
Lower entry threshold
Mutual funds are accessible to a wide variety of investors. In addition to a one-off subscription, retail investors could invest via a monthly subscription at a minimum of HK$1,000 - an optimal way to gain exposure to global financial markets.
The investment style, objective, and scope of mutual funds could vary. They could invest in a single market, a specific industry or across many markets globally. For example, money market funds aim to hold highly liquid assets to help mitigate risks, fixed income funds strive to generate stable income, equity funds seek relatively high-potential growth and multi-asset funds harness different asset classes for optimal outcomes.
Lower concentration risk
A mutual fund generally invests in many types of securities. With ease of access, individual investors could diversify* their investments globally at a relatively lower cost. Compared to holding just a single security, the concentration risk for mutual funds is lower.
Relative ease when opting out
You decide when to buy or sell a fund, and that means you are able to exercise full control over your investment portfolio and capital.