Game Set to Zero: Go Go Fund Investments (My first blog topic - weeeee!).
There is a conceivable rational for investing in capital markets RIGHT NOW.
Simply because the Investment Game has been set to near ZERO (market near all-time lows) since the Housing-led recession began in the summer of 2007.
However market volatility and investor uncertainty exists about the depth of recession; indeed even the solvency of the financial system is at stake. So in this risk averse environment for those investors that have not found safe specialist selective investments then fun funds is the way to go.
Funds are by definition diversified and therefore mainly market risk (systematic risk) is inherent while other direct individual investments posses stock specific risk (idiosyncratic risk) as well as market risk. Of course funds have a degree of specific risk, viz Madoff fraud, just as regulated Enron was a significant fraud. However a multi-manager/FoFs offering from say GAM, MAN, Gottex, Ivy etc have not resulted in any significant 'blow-up' or loss of investors' money; ie not significant enough to hit general headlines.
Traditionally the diversified approach has been the cautious first steps in risky markets, for example, emerging markets investors in the 1980's used funds as an entry point to new markets before years later having the savvy and access to invest directly into, say the TAIEX stock market of Taiwan. Anyone remember the Taipei Fund offering from NITC?
I am sure there are more specific aspects to discuss on Investing Now Via Funds; yet as a general premise and rational I kindly ask anyone to refute or discuss additional points. (Kristian - Original post: 10 am GMT, 29 June 2009, London,UK)