Funds and investments
An investment fund is an collective investment vehicle that pools the cash of investors to invest in an investment portfolio that includes bonds, shares, or other assets. Each fund is managed by a person who decides the type of assets to purchase or sell, and is charged fees for managing the fund. There are many different types of investment funds, such as unit trusts (UCITS), OEICs and open ended investments companies (OEIGCs).
When investing in funds, it’s important to consider the motivation behind why you are doing this, how long you want to invest and also your profile as an investor that reflects your level of tolerance to risk. For instance, investors who are younger may have more time and be more willing to take on a higher risk to increase growth over the long run.
Diversification is a great way to lower your risk, as is saving. Diversification means the spread of your money across several classes of assets that have lower correlations in their price movements. This lets you reduce the value loss in one particular asset class through the gain of another asset class.
Another way to mitigate risk is through using’smart beta’ or low-cost investments. These are passively managed funds which attempt to replicate movements of a certain index of the stock market, such as the FTSE 100, or S&P 500 without the need for judgement.
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