INVESTORS

There are many reasons why we become investors and these reasons reflect our individual needs. However, there is one goal common to all investors: To get the best and most effective returns on our investments! However, a question springs up: what is the best valuation for us? It depends on an individual perception of investment value fluctuations and therefore the rate or risk, expected return, and last but not least the expected term of the investment.

Just like our individual needs and perception of market risks and expected returns vary, we offer various types of open-end mutual funds. That is why it is important to correctly select the suitable fund, or portfolio of funds, to decrease the fluctuations of our investment as much as possible. Not every instrument is suitable for each and every investor – either due to its recommended investment horizon, or the risk rate associated with an investment in the given product.

We may use diversification to effectively decrease the market risks associated with an investment. Diversification refers to a distribution of market risks to individual asset classes (money market instruments, bond instruments, shares), to individual territories (economically developed markets, developing markets), and also the selection of suitable funds for an expected term of your investment.

In order to select suitable fund/funds for one’s investment, it is very important to determine one’s investment profile – profile of an investor. It provides guidance to an appropriate structure of funds portfolio, so that it reflects individual needs of an investor.

If you would like to find out what kind of an investor you are, complete the Investment questionnaire.

It is also necessary to realize that we may distinguish investors according to an owner of the resources invested – private individuals, companies and institutions, and cities and municipalities. In case of financial resources of private individuals, it is basically possible to recommend any type of funds – it only depends on the perception of risks, expected returns, and expected term of the investment horizon.

Safety is accentuated lot more in case of financial resources of companies and institutions as well as in case of financial resources of cities and municipalities – the conservative nature of an investment as well as its expected investment horizon tends to be shorter. These facts are also limiting for a potential return achievable by such client. Conservative funds with a shorter recommended investment horizon are therefore suitable for these clients – i.e. money market funds, bond funds, and even balanced conservative funds, which only contain a low proportion of shares.

Conservative investors have a low or no experience with collective investment funds, they prefer stability of their investments, and have high aversion to investment risk. At the same time, however, they are interested in starting with capital market investments to get higher returns than the returns usually available from time deposits and, in medium-term horizon, even short-term money market rates. Portfolios of conservative investors mostly comprise money market funds, completed with bond funds. Equity funds are represented marginally. Due to their risk aversion, investors require lower fluctuations of investments than in case of investments in bond funds.

Cautious investors have had some exposure to collective investments. Their risk aversion is lower than in case of conservative investors, which is also reflected in the structure of their portfolio. The portfolio comprises, in addition to money market funds and conservative bond funds, also funds with a higher expected return – such as balanced funds with a limited equity component and more dynamic bond funds. The value of the whole investment may therefore fluctuate slightly more than in case of investments in bond funds only. At the same time, however, the investment within the portfolio provides an opportunity for achieving higher returns than those, which are usually available for bond funds.

The familiarity of balanced investors with collective investments is very good. The importance of the equity component is starting to grow for these investors, as it makes up a significant part of the portfolio; however, bond funds are still prevalent within the portfolio due to an increased risk aversion. While the bond and money market components of the portfolio are to decrease the investment amount fluctuations, the equity component provides dynamics to the investments and investors may therefore achieve higher valuations.

Dynamic investors have a relatively long experience with collective investments. Their risk aversion is the lowest one from all the listed types of investors. Their portfolios are dominated by equities, at the expense of bond funds and money market funds. The minor bond portion of the portfolio ensures a partial risk reduction in case of an adverse development of prices on stock markets. The structure of their portfolio brings higher investment value fluctuations – that is why the investment horizon should be at least 5 years.