What Is a Commingled Fund?

A commingled fund mixes together assets from various accounts, providing investors with the benefits of an economy of scale. This term simply means the investors, though they are each small, can pool together to make one large network. Commingled funds are often called pooled funds for this reason.

Advantages of a Commingled Fund

The main advantage of a commingled fund is more efficient trading. You can reduce the transaction cost on your own account by spreading that cost amongst the various members of the fund. Further, commingled funds can help spread risk and diversify a portfolio. Many mutual funds offer commingled investing as a way to provide for better management of shares on the market.

Disadvantages of a Commingled Fund

When you mix your investments with those belonging to other people, you give up some degree of sovereignty. You cannot suddenly decide to personally jump out of one option and into another. Instead, your decisions must match the goals of the group. This is very common with mutual funds, where group mentality dominates any individual interest. Only consider a commingled fund if you believe you can match your goals with those of the group as a whole and move forward without conflict.

blog comments powered by Disqus
Scottrade