A moderate investment fund is a type of investment fund in which the investor is willing to assume a medium risk, which will also mean average return .
Therefore, the investment fund management entity will have the obligation to invest in financial products classified as medium risk. Under no circumstances may you invest in high-risk or low-risk products. Remember that an investment fund is a collective investment institution that captures money in the form of contributions to invest together.
Characteristics of the moderate investment fund
The characteristics of these types of funds are as follows:
- The investment risk is medium. Conservative funds are aimed at investors with a medium risk profile. That is, it is aimed at investors who are willing to take more risk than a conservative investor but less than an aggressive investor.
- The return on investment is medium. These funds will offer a higher return than conservative funds but less than an aggressive fund.
- The products in which it invests are usually both fixed incomeas equity , although not a prerequisite. It is said that moderate funds are made up of investments of a fixed and variable type since usually a portfolio of these characteristics carries a risk called “medium”. However, moderated funds may consist exclusively of fixed income products or exclusively equity products.
Therefore, the determining factor is to analyze the risk involved in the investment. If this risk is classified as a means, we will find a moderate investment portfolio, regardless of the interest rate that affects the investment (fixed or variable income).
Advantages and disadvantages of a moderate investment fund
Moderate funds are located between conservative funds and aggressive funds. The main advantage of conservative funds is their low risk (although this entails low profitability, as a great inconvenience), while the main advantage of aggressive funds is their high profitability (although this carries a high risk, as a great inconvenience). Moderate funds manage to eliminate the disadvantages of conservative funds (low profitability) and aggressive funds (high risk), although they do not offer the advantages of the former.
Therefore, it could be said that the main advantage of moderate funds that are not as extreme as conservative or aggressive funds. They offer an acceptable return with assumable risk. These products are usually the most recommended for most investors, as there is a reduction in risk with respect to aggressive funds and an increase in profitability with respect to conservatives . However, in any case, it will be necessary to analyze the risk profile of each investor to be able to catalog it in these moderate funds, or in aggressive or conservative funds.