Cash Plus Fund

Posted in Finance, Accounting and Economics Terms, Total Reads: 429
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Definition: Cash Plus Fund

It refers to a type of mutual fund that is targeted mainly at conservative investors who are highly risk averse. These were started in Australia and then became popular in the entire world. The portfolio managers of these type of mutual funds invest in a mixture of money market securities and fixed income securities.

As expected, as the risk is very less, the returns that these funds give are very low. The investors investing in these type of funds are not really looking for high rate of return, rather they are looking for safe places to invest the money they have and earn little return. The diversification of these funds in the avenues where they invest make them virtually risk free. This is because these funds in invest in variety of areas where the funds are risk free.

The fees is generally very low and the funds are well diversified and pose very little risk. Along with all the highly risk averse investors, various investors generally invest in cash plus funds to make a considerable portion of their portfolio risk free (or of very low risk). It is a good practice in portfolio management to have a certain proportion of the portfolio to be invested in the cash plus funds. The reason for that is they pose very low risk and give reasonable returns. Even the risk seeking investors are looking forward to allocate certain proportion of their hard earned money to cash plus funds. This is because in cases of emergencies like recession, these type of funds play a major role in risk aversion and keeping safe one’s hard earned money.

Example: Birla Sun Life Cash Plus is a type of Cash plus fund. This fund invests in diverse and safe areas such as Treasury Bills, Commercial Paper, Certificate of deposit etc.

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