Moderate investment fund


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 a medium return.

Therefore, the management entity of the investment fund will have the obligation to invest in financial products classified as medium risk. In no case may you invest in products that are neither high risk nor low risk. Remember that an investment fund is a collective investment institution that collects money in the form of contributions to invest it jointly.

Characteristics of the moderate investment fund

The characteristics of these types of fund are as follows:

  • The investment risk is medium: Moderate funds are aimed at investors with a medium risk profile. That is, they are 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 is invested are usually both fixed income and variable income, although it is not an essential requirement: It is said that moderate funds are made up of fixed and variable rate investments since a portfolio of these characteristics usually entails a risk called "medium". However, moderate funds may consist exclusively of fixed income products or exclusively equity products.

Therefore, the decisive factor is to analyze the risk involved in the investment. If this risk is classified as medium, we will find ourselves with 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 fall between conservative funds and aggressive funds. The main advantage of conservative funds is their low risk (although this entails low profitability, as a major drawback), while the main advantage of aggressive funds is their high profitability (although this carries high risk, as a major drawback).

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, arguably the main advantage of moderate funds that they 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, since there is a reduction in risk compared to aggressive funds and an increase in returns compared to conservative funds. However, in any case, it will be necessary to analyze the risk profile of each investor to be able to classify it in these moderate funds, or in the aggressive or conservative funds.

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