Collective investment schemes as referenced in Ghana laws are basically, pools of funds that are managed on behalf of investors by a professional manager. The administrator or manager uses these funds to buy bonds, stocks, and other securities available on the market in compliance to the specific investment objectives and policy that underpin the scheme. The reward for putting aside monies into these funds is that, the investor receives shares or units that represent the investor’s pro-rata share of the pool of fund.
For the administration role and management of the investment portfolio, the fund manager charges a fee based on the value of the fund’ s assets in compliance with the SEC regulation of fees and charges. Collective investment schemes in Ghana take the form of either a Mutual Fund or a Unit Trust. The characteristics of collective investment schemes in Ghana are provided for in the Securities Industry (Amendment) Law 2000, Act 590 and are not necessarily the same as those of other jurisdictions.
Is Collective Investment Scheme worth a try?
It is important to admit that Collective Investment Schemes have some impressive advantages over other forms of investment opportunities. It is in this light that I take delight in throwing more light on some positive reasons to invest in Collective Investment Schemes.
- Efficient Professional expertise & Management
Mutual funds and Unit trusts are managed by seasoned professionals with the expertise in investing money, and further possess the skills and resources and exposure to research many different investment opportunities available. Investors in these funds are therefore assured of highly professional management of their funds for good returns; though not in absolute terms since in Finance, previous history is not a guarantee for future returns.
- Instant Diversification
Investing in a number of different securities helps reduce the risk of investing. When the investor buys a share or a unit in a fund, the investor buys an interest in a portfolio of assorted securities, providing the investor instant diversification, at least within the type of securities held by the fund. A portfolio made up of stocks from various companies is a good example of instant diversification upon purchase of some portions of the fund.
- Constant Performance Monitoring
The Net Asset Value Per Share (NAVPS) or the bid and offer prices of open ended funds are reported in the media and on many internet sites as pertains in other markets, allowing the investor to continually monitor the performance of his/her investment. In Ghana Investment companies like Data Bank, Insecurities, SEM capital, CDH securities and other report on the performance of investment assets almost on daily basis offering excellent performance monitoring on the part of investors
With many funds, the investor can begin buying shares or units with a relatively small amount of money; say ¢1000 for first time purchase. This feature of Collective Investment Schemes demystifies the entry hindrance experienced by some other investment opportunities. Some funds even allow investors to buy more shares on a regular basis with more smaller monthly or quarterly installments.
Shares of open-end mutual funds can be redeemed at any time at the Net Asset Value Per Share (NAVPS) of the fund. This is in compliance with SEC regulations, making funds available to investors at any time as compared to the close-end funds.
Many fund management companies administer several different funds, be it money market, fixed-income, growth, balanced and international funds, and allow the investor to switch between funds within their risk appetite at little or no charge. This can enable the investor change the balance of his portfolio as his personal needs or market conditions change.
The advantages of Collective Investment Schemes is apt, since it is beneficial to investors as it offers greater diversification of assets, thus reducing risk. It is always in your best interest as an investor to do thorough due diligence and think twice before making any commitment regarding Collective Investment Schemes.
Please remember the value of investments can go down as well as up and you may not get back the amount you initially invested. If you have any doubts about which investment product is right for you please contact your financial adviser.