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For most people, creating, maintaining, and increasing hard-earned capital is a challenging task. Capital left only on deposit will gradually loose its purchasing power through the negative effects of inflation.
Alternatively, highly speculative investment may produce substantial gain but also risks potential loss.

Risk vs. Return: Choosing the right investment for each individual

A general rule of thumb is the lower the risk, the lower the returns. On the contrary, the higher the risk, the greater the exposure to volatility, but higher the potential gain..

Expert financial advisors at CFS will analyze our clients’ investment profile on a personal basis and propose the best solution for each case separately.

Balancing these opportunities and the risks that are often associated with them, with the correct degree of security, is the concept behind investment funds.

Many investors would like to have the opportunity to invest in the world’s stock markets and take advantage of these markets’ long-term growth potential, but are uncertain as to the best way of accomplishing it. One approach is to invest directly in individual companies; however, this tactic requires significant dedication of time and expertise, substantial amounts of money in order to achieve adequate spread of investments, and, often luck.

Mutual Funds: The future in investments

Mutual funds provide a more appropriate investment alternative to ordinary investors. They provide them with the ability to combine their resources with the other investors that share similar investment goals, creating a pool of funds that can be invested more effectively in a large number of stocks and shares, thus taking advantage of a wide range of investment opportunities. By diversifying the mutual funds’ investments across many different companies, and often, across different countries, the risk of investment is significantly reduced.

By pooling their savings in mutual funds, investors can also afford to have their portfolio managed by professional investment managers who have the necessary information and expertise to make the appropriate investment decisions. Furthermore, investments in mutual funds are extremely liquid. Investors can have instant access to their money whenever they need it.

Benefits of Mutual Funds’ investments

Mechanics of funds

When you make an investment in a mutual fund, your money is invested together with that of other investors and you are allocated a number of units in the fund. The number of units received is determined by the amount of money invested and the value of the units on the day of the investment.

The net asset value of the units (NAV) is calculated at regular intervals and depends on the value of the investments held by the mutual fund at that time. As the value of the underlying investments varies daily, so does the value of the units in the fund.

Most international investors recognize the great rewards that are available from the world?s equity investment markets, but are equally aware of the need to balance their capital with other investment vehicles, such as bank deposits and government securities. Consulco Financial Services, through the featured financial institutions, offers the investor the opportunity to maximize portfolio diversification with just the level of exposure that is required by the investor. By adjusting your investments to better align with the timing of your goals, you can often improve your overall results.

Generally, the longer the investment horizon, the more investors tend to concentrate on growth, or stock, investments. As the investment horizon shortens, the investor tends to shift towards income investments and cash equivalents, these being more stable and lower risk. The CFS financial advisor will thoroughly explain to you the spectrum of investment funds available, the investment strategies, the sectors of economy in which they are being invested, and the risk and return characteristics. Briefly, the categories of funds are:

These funds provide the guarantee that the capital invested cannot be lost, while giving the opportunity to participate in achieved gains. The value is reviewed regularly, and the achieved gains are added to the capital, which also becomes guaranteed.

These funds are invested in money market instruments, such as short-term bonds and certificates of deposit. Practically risk-free, the funds offer an income at the same level or marginally higher that the traditional deposits.

These funds are typically invested in medium and long-term bonds. These bonds can be either corporate or government whereby the bonds are rated based on the issuers ability to repay investors. Corporate bonds are issued by corporations that need to fund their operations or cash flows and the risk associated with the bond is relative to the creditworthiness of the company. Many large corporations are rated by world known agencies such as Standard & Poors or Moodys and provide guidance as to the level of risk an investor takes when investing in such products. On the other hand government bonds are considered as less risky since the issuer is a country or a government. Countries are again rated by international organizations and CFS seriously takes into account these reports when advising clients on in any financial instrument.

Unlike individual bonds, Bond funds have no maturity date and provide high liquidity. Dividends can be reinvested in the fund to increase the principal, and the fund can take advantage of fluctuating interest rates. Also these funds achieve to reduce investment risk by investing in different maturities of underlying bonds, across countries and continents, and various corporations.

These funds are invested in company shares, or stock, and are grouped in specific categories, such as industry, country, continent, wider geographical area, or internationally. For example, some equity funds invest in well-established companies in Europe or the United States that pay regular dividends. The more risky equity funds might e.g. invest in young, high technology companies in California’s Silicon Valley, with the aim of reaping the vast growth of the high-technology boom. The advantage of the equity fund is the diversity- a typical equity fund might own stock in 100 or more companies, meaning that losses in some stocks will almost always be offset, or overshadowed, by gains in others. At any time, the advantage is that the investor chooses the fund and the level of risk, he/she feels acceptable.

These funds combine investments in equities, bonds, and the money markets around the world, focusing on an overall strategy designed to fit predetermined risk profiles, such as conservative, balanced, and aggressive. In other words, this is a portfolio of funds that achieves even more diversification, depending on the investors’ profile.

Time horizon is an important factor to be taken into account when building an investment portfolio. The shorter the time horizon then the lowest the exposure in equities must be and the longer our investment horizon then the exposure in equities could be increased, always depending on the personal risk profile of the investor. The risk profile of the investor along with the investment horizon parameter and the experience in capital markets are some of the factors that are discussed in a personal meeting with our clients, before we provide them with any investment advice. Since we all have unexpected needs but also want to capture investments opportunities as they arise, liquidity is also of major importance in investments. Mutual funds are an excellent way to invest in the global markets since they provide among others (see benefits of mutual funds) the ease of entry and exit that is, liquidity.

CFS has extensively researched the markets, having chosen the best fund managers for their particular fields. The custodians who hold funds on behalf of the investor operate under strict European financial regulations, whereby investor protection is of paramount importance.

Different Categories of Funds

Concept of funds as a vehicle for international investments

Risk vs. Return: Choosing the right investment for each individual

Mutual Funds: The future in investments

Benefits of Mutual Funds’ investments

Mechanics of funds

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