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Collective Investment Scheme Definition
A collective investment Scheme (CIS) is a type of investment scheme which involves collecting the money from different investors and then combining all the money collected to fund the investment. The Collective investments provide a means for ordinary people to invest in the stock exchange and to beat inflation by getting good returns. Collective Investment Schemes (CIS) are a popular form of investment and they are accessible to all. A collective investment vehicle is defined as a way of investing the money alongside the other investors in order to benefit from the inherent advantages of working as a part of a group.
It hires a professional investment manager which theoretically offers the prospects of better returns and risk management.
- It provides benefit from the economies of scale which is a cost-sharing among others.
- Diversifies more than would be feasible for most individual investors which reduce the risk.
The term collective investment vehicle varies with country but it is also referred as Mutual funds, Managed funds, Investment Funds or simply the funds. Similar to a mutual fund, a collective investment scheme provides almost absolute control of the investment to the company pooling and investing the money. The world across the large markets of the world has developed around collective investment and these account for a substantial portion of all trading on major stock exchanges.
The Collective investments are being promoted with a wide range of investment aims either targeting specific geographic regions or specified industry sectors like Technology. An investor has a proportional stake in the CIS portfolio based on how much money the investor has invested or contributed.
The word unit refers to the part of the CIS portfolio which is owned by the investor. The word trust is the financial instrument that is created in order to manage the investment. It enables the financial experts to invest the money on behalf of the CIS investor. CIS provide a relatively secure means of investing in the Stock Exchange and other financial instruments. The sums of money that are exchanged on the Stock Exchange and in the Money Markets make them too pricey for most people. With a CIS, the money or funds from a group of investors are pooled or collected together to form a CIS portfolio.
