It can be difficult to build an effective portfolio by investing in shares yourself.
To find enough investment opportunities, you will probably need to research a great
many companies from across a wide range of sectors and market. And unless you have
significant amounts of money to put aside, you are unlikely to be able to buy a
wide enough selection of holdings.
Fortunately, there is an easy alternative. You can invest in mutual funds. These
investments are offered by financial institutions, such as banks and investment
companies. When you invest in a mutual fund, your money is pooled with that of other
investors and the manager of the fund invests across a range of sectors in a wide
selection of companies often between 80 and 100, though it can be more that meets
If, for example, you choose an emerging markets growth fund, the manager would invest
in a selection of businesses from across the worlds emerging markets, focusing on
companies that he believes have the potential to produce the greatest returns over
the coming months and years.
An expert's selection
Mutual funds offer you a way to invest in more companies from a great range of markets,
but they also have another major advantage. You can benefit from the expertise and
experience of a professional fund manager and the immense research resources that
they may be able to draw on.
The best investment companies have teams of analysts "on the ground" around the
world. This allows them to search across entire markets or regions for companies
with unrecognized potential and a reasonable share price.
Once a company has been identified as a possible investment opportunity, the teams
will analyze it carefully, evaluating the balance sheet and meeting the management.
Their research doesn't stop there. They also ask company's suppliers and customers
for their views.
The largest and best known investment companies can go even further than this. Thanks
to their reputations and presence in the marketplace they can get significantly
more access to key personnel at each company. This allows them to look beyond the
standard presentations and get a first-hand view of developments that may be affecting
the price of a stock.