Collective investment schemes are the schemes in which a lot of investors pool their resources. The reason why collective investment schemes were derived was because of the fact that the stock markets or other markets where other types of securities were traded were only accommodating people with a lot of money. This led to two severe problems, one for the markets, and the other for the investors. The markets faced the problem of liquidity because of the lack of investors available for investment in the market, which not only slowed traded but the market only, depended on few stock traders. On the other hand the investors with two few resources had no access to the market, and market rules didn’t permit them to enter. Different types of mechanisms were later derived by the collaboration of investors and the different capital markets. Collective investment schemes work differently around the world and there are many ways in which small investors can now be accommodated through the pooling of their resources.

Earlier, the only thing to be considered for the collective investment schemes was enabling small investors to enter in to that particular capital market and get benefited. With the passage of time there have been new and better reasons to evolve collective investment schemes. Now collective investment schemes are introduced for a particular region, for a particular industrial segment, for a whole industry (not a sector), or investment in performing stocks or indexes. There have been different mechanisms derived through which these schemes have become easily accessible as well as advantageous to everyone. Two of the most famous investment schemes include mutual funds and investment funds.

Most of the time the responsibility of managing the funds that have been pooled through the different collective investment schemes is given to professional people who know their jobs very well. These include the fund managers responsible for investing decisions and the supportive staff looking over the other affairs relating to the funds accumulated through the collective investment by the investors.