The reason total return funds are more expensive

Economy
Economy

The total return funds are different from traditional mutual funds also known as actively managed funds in two respects. One allow the operator greater degree of freedom of action as to which type of stocks and bonds to choose for maximum gain. The other have different goals.

Total Return Funds

Total Return Funds

Let’s clarify better. While in traditional mutual funds which may be U.S. equity funds, bond funds in government bonds etc. Operators with the goal of beating the benchmark are that specific market and can only choose whether to overweight or underweight the securities depending on the idea that they have made ​​with regard to their prospects. However, in total for return funds the manager sets a performance target to reach a priority and have more freedom and dynamism in portfolio construction to use all possible investment instruments in a manner free from the stock market trends, in other words not having to keep a fixed point of reference at the benchmark.

Economy

Economy

Who manages a fund total return promises gains even if there is decline in equities because it is free to invest against the market and to use derivative instruments to reduce the volatility of the securities. This type of work is more risky and complex so investing in a total return fund is much more costly in terms of fees. Choose this type of investor funds in the medium or long term range with a high or medium risk tolerance.

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