Investment and funds

An investment fund is a collective investment vehicle that pools the funds of investors to invest in a portfolio of bonds, shares or other assets. Each fund is managed by a fund manager who decides on what to purchase and sell and charges a management fee. There are various types of investment funds, such as unit trusts (UCITS), OEICs, and open ended investment companies (OEIGCs).

When you are considering investing in funds, it is crucial to consider your reasons for doing so, how long you want to invest and your investor profile, which reflects your willingness to take risks. For instance, younger investors may have more time on their side and are more at ease with a higher degree of risk in order to increase their growth in the long run.

As with saving one of the most effective methods to lower risk is to diversify. This is the process of spreading your investments across a variety of asset classes that have less correlation between their price fluctuations so that a decrease in value of one class can be offset by a gain in a different one.

Low-cost or smart beta investment is investment and funds a different way to minimize risk. These are funds that are managed passively that attempt to replicate fluctuations of a particular index of the market such as the FTSE 100, or S&P 500 without the need to make a judgement.