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Damian Maggio on the Importance of Fund Strategy

 

A fund strategy is a style of investment that is governed by a set of procedures and rules created to guide investors for designing their investment portfolio. Damian Maggio says fund strategies guide investors' decision based on their objectives and risk profile. A few investment strategies are meant to offer outstanding returns with high-risk, while some investment strategies focus on wealth protection.

Factors that you should think about

  • Without an appropriate investment strategy, your investment will have no direction.
  • Investment tactics should be framed by considering your risk profile and goals.
  • Your investment horizon must play a critical factor for framing fund strategy.

Significance of fund strategies

Mutual fund investment strategies, or any other investment kind, must incorporate an understanding of the market conditions and final objective of the fund. Since mutual funds are typically pools of money managed by a specialized money manager, there are numerous different mutual fund investment strategies. Prospective strategies are only restricted by regulatory problems, the ability of money managers, the wish of a sponsor to establish such a fund and the demand from investors for that kind of fund.

Outline of Fund Investment Strategies

Damian Maggio says that mutual funds are categorized by mutual fund surveys into categories based on their investment policy statement and the principal type of assets held. This classification influences the mutual fund investment strategies that are applicable. The broad categories are:

Equity Funds, which hold mainly common stocks, or “equities;” bonds and fixed income securities; Balanced Funds, which hold bonds, stocks, and short-term securities and enable the investment manager to change the proportion of these investments; Income or Dividend Funds, which hold common and preferred stocks that generate high dividend income; and Money Market or Short-Term Funds, which hold money market securities, treasury bills, and other income generating investments which are less than a year in term.

Initially, there would seem to be little restraint on the fund type that can be made. In reality, most funds are setup by marketing imperative. A fund support will only setup a type of fund if there is the sufficient prospect of assembling adequate assets to offer a profitable return.

Mutual fund investment strategies affect the way these funds are arranged and the kinds of assets they can be invested in. While classification can be quite loose, it is essential when considering the classification and marketing of funds. As we have seen, loosely defined categorization can cause disagreement between the actual investments of a fund, its market category, and the internal understanding of the fund.

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