The main goal of allocating assets among various asset classes is to maximize return for chosen level of risk; or, stated another way, to minimize risk given a certain expected level of return. Of course, to maximize return and minimize risk, one needs to know the risk-return characteristics of the various asset classes. The chart compares the risk and potential return of some of the more popular ones: Ezzeddin Ahmed Saudi Gazette
JEDDAH – The volume of money invested in mutual funds managed by Saudi banks posted an average annual increase of 10 percent in 2012, said Talat Zaki Hafiz, secretary general of the Media & Banking Awareness Committee of Saudi Banks. The volume rose to SR90.83 billion at the end of the third quarter of 2012 from SR82.19 billion in 2011. It comprised of SR70.8 billion local investments and SR19.27 billion foreign assets. Hafiz said that the number of mutual funds reached 239 as of the end of 3Q last year with a total of 239,654 men and women investors representing various sections of the Saudi society. The official said that he did not notice any substantial or great impact on the situation of these mutual funds due to new issues made by the companies listed in the capital market. “The mutual funds continue to remain as one of the most favored and strong means of investment among a large number of Saudi investors,” he said, while attributing this to a number of factors such as desire of investors to diversify their means of investment though pumping money to various channels, and their apathy to make any more investments in the volatile stock market. According to Hafiz, there is a section of investors who still prefers mutual funds and portfolios managed by banks to making investments in the Arab world's largest bourse. Many of these investors are being influenced by economists and market analysts who advise them not to make any direct investments in the stock market as it involves risks, and instead invest through investment funds or licensed brokerage companies. He said revenues as well as percentage of risks involved vary from one mutual fund or portfolio to another. “The nature of these funds is also different from one another, as some of them invest in the local market while some others invest in the foreign market.” Dr. Ali Al-Tawati, a financial analyst and professor of economics and capital financing at King Abdulaziz University, said that investment in mutual funds and investment portfolios managed by banks has become a strong means of investment because of the lack of other means of investments, especially small and medium investments, in the Saudi market. He attributed the tremendous response to pump money into the mutual funds and portfolios managed by local banks due to the low risk factor compared to other means of investment available in the market. “Even though the mutual funds and investment portfolios managed by banks are much safer comparing to others, this does not mean that they are not vulnerable to losses due to the unexpected developments and fluctuations in the global market, where these funds and portfolios have some of their stake.” Al-Tawati noted that most of the mutual funds and investment portfolios strive to increase their profits through making investments in the global currency or stock markets or the markets of precious metals such as gold and silver. “Such investments are also not risk-free as was evident during the economic crisis that struck the world in 2008. During that period, banks were more prone to losses due to their investments in foreign equity and mutual funds,” he added.
