By combining different assets you can reduce the risk of investing in one particular asset class. For example look at the relationship between NZ equities and International equities over the last 10 years. A.P. Gouthey, Philosopher. We do recommend spreading your investments across a range of asset classes and regions. There are privately and publicly owned shares.
Fund managers use publicly owned shares listed on stock markets.
A fund manager uses your money together with other investors to buy a parcel of shares, ranging from 30-50 different shares. With a Unit trust you can achieve diversification and have experts managing the investments versus you buying shares directly. Unit trusts and insurance bonds allow the small investor to invest in a widely diversified portfolio of investments, both in local and international markets, which were previously the domain of larger institutional investors. Using unit trusts you have the security of a Trustee style of investment and the benefits of good liquidity with competitive fees and transaction costs. Small investors also benefit from the experience and expertise of full-time professional fund managers and in many cases they have free switching opportunities between the various investment funds managed by a particular fund manager.