Bundle investments refer to investment products that contain a basket of individual investments bundled together. This allows investors to achieve diversification more easily. Bundled investments can take various forms such as mutual funds, ETFs, managed portfolios, etc. They provide a cost-effective approach to gain broad market access and reduce portfolio risk.
Low Cost and Convenience of Bundle Investments
One of the biggest advantages of bundle investments like mutual funds and ETFs is their low cost. The management fees are significantly lower compared to individually investing in all the underlying assets. For example, an ETF tracking a broad stock index may charge only 0.1% expense ratio versus much higher trading commissions and spreads if one tries to replicate the index by directly buying the constituent stocks. Bundled products also provide great convenience through a single transaction to gain diversified exposure.
Risk Mitigation Through Asset Allocation Funds
Asset allocation ETFs and mutual funds hold a basket of underlying equity, bond and other ETFs in different proportions based on the fund’s risk mandate. An investor can pick a suitable asset allocation fund aligned with their risk appetite instead of deciding exact allocations. As the fund manager handles the ongoing rebalancing, it simplifies investing further. Popular asset allocation bundle funds like the iShares Core Allocation ETFs automatically adjust exposures across growth vs. conservative assets.
Customized Bundles Through Managed Portfolios
While basic index mutual funds and ETFs provide simple bundled access to broad markets, investors can also create customized bundles through managed portfolios. Based on an investor’s specific goals, time horizon and risk tolerance, advisors construct tailored portfolios bundling various funds and assets. These customized bundles cater to individual needs better than basic bundled products.
Criticism of Bundled Investments
The biggest criticism leveled against bundle investments is their average performance dragged down by underperforming constituents. An index fund for instance tracks the broad market so will include winners and losers. However, for most retail investors, passive bundled investments tend to perform better than selective stock picking requiring extensive research and trading skills.
In summary, bundled investment products like mutual funds and ETFs allow easy diversification at low cost for retail investors. Asset allocation bundles simplify risk management further. Customized bundles through managed portfolios provide more personalization. Despite some criticism, passive bundle funds are suitable for most regular investors over active stock selection.