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Without the aid of financial intermediary, individuals can invest in the claims of a number of...

  1. Without the aid of financial intermediary, individuals can invest in the claims of a number of different corporations and in the process diversify their investment portfolio. So why do individuals seek to use financial intermediaries to do this for them? Discuss.
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Answer #1

It is true that individuals can diversify their investment to reduce risk in the same way that financial intermediaries can spread their risk accross different asset categories.

However,intermediaries can do this more cost efficiently way than individuals because intermediaries pools the funds of many investors and can spread these funds across much larger range of assets,in some cases acessing high value assets which would not be available to individual investors and intermediaries can generally do so at lower transaction costs than individuals

Further,intermediaries employ specialists who have substantial knowledge and expertise regarding specific investment markets and can select investments accordingly.

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