Approved Lists in Investing: A Comprehensive Guide

An approved list is a list of investments that many mutual funds use to select the individual securities that they invest in. Here are the basics of the approved list and how it works.

The Approved List

This is essentially a list of securities that have been chosen because they were determined to be acceptable investments. Many times, a brokerage will have their research team come up with a list of securities for the brokers to use. The purpose of this list is to try and limit the possible investment choices that a broker has in front of them. Sometimes this is done because the brokers are inexperienced. Other times, it is simply a way to provide a list of securities that have already been thoroughly researched by the brokerage team.

Limited Options

One of the drawbacks to a broker using an approved list is that it limits the investment options for investors. Many people feel like they are confined when they can only choose from a list of particular investments. This can also limit the overall performance of the investors when they cannot choose from all of the available investments in the market. Therefore, these lists are not popular with certain investors.