what are pooled funds 
pooled funds are funds in a portfolio from many individual investors that are aggregated for the purposes of investment mutual funds hedge funds exchange traded funds pension funds and unit investment trusts are all examples of professionally managed pooled funds investors in pooled funds benefit from economies of scale which allow for lower trading costs per dollar of investment and diversification the basics of pooled fundsgroups such as investment clubs partnerships and trusts use pooled funds to invest in stocks bonds and mutual funds the pooled investment account lets the investors be treated as a single account holder enabling them to buy more shares collectively than they could individually and often for better discounted prices mutual funds are among the best known of pooled funds actively managed by professionals unless they are index funds they spread their holdings across various investment vehicles reducing the effect that any single or class of securities has on the overall portfolio because mutual funds contain hundreds or thousands of securities investors are less affected if one security underperforms another type of pooled fund is the unit investment trust these pooled funds take money from smaller investors to invest in stocks bonds and other securities however unlike a mutual fund the unit investment trust does not change its portfolio over the life of the fund and invests for a fixed length of time advantages and disadvantages of pooled fundswith pooled funds groups of investors can take advantage of opportunities typically available to only large investors in addition investors save on transaction costs and further diversify their portfolios because funds contain hundreds or thousands of securities investors are less affected if one security underperforms the professional management helps to make sure investors receive the best risk return tradeoff while aligning with their work with the fund s objectives this management helps investors who may lack the time and knowledge for handling their own investments entirely mutual funds in particular offer a range of investment options for the highly aggressive mildly aggressive and risk averse investor mutual funds allow for the reinvestment of dividends and interest that can purchase additional fund shares the investor saves money by not paying transaction fees to hold all of the securities contained in the fund s portfolio basket while growing his portfolio diversification lowers risk economies of scale enhance buying power professional money management is available minimum investments are low commissions and annual fees are incurred fund activities may have tax consequences individual lacks control over investments diversification can limit upside 