Safety of investments
- Because the investments are held by a custody bank on behalf of the investor, they are safe and cannot be misappropriated. Further and unlike individuals, when doing investments like purchase of quoted stocks, the custodian will only pay the broker when they have received the stocks – this reduces the chance that money can be lost in the settlement process.
Professional investment management
- The daily management of investment is done by the fund manager who is highly competent, qualified and experienced and whose day to day job is to search for and monitor good investments and realize good returns.
Higher bargaining power by the fund manager when carrying out investments
- The fund manager has a higher bargaining power than an individual investor on account of the large sums of money under management. For example, commissions paid to stockbrokers are discounted while money invested in fixed deposits attracts better return