Investment and Funds

Funds and investment

Investment funds are collective investment vehicles that pool the money of investors and invest it in an investment portfolio made up of stocks, bonds, or other assets. Each fund has a manager who decides what to purchase and sell, and also charges an administrative fee to manage the fund. There are a variety of investment funds. They include unit trusts (UCITS), OEICs and open ended investments companies (OEIGCs).

When investing in funds, it is important to take into consideration the reasons you are doing so as well as your investment profile, which reflects your risk tolerance, and the time frame you plan to invest. For instance, investors who are younger, may have more time and be more at ease taking on a greater risk level to maximize growth over the long term.

As with saving, one of the best methods to reduce 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 another.

Smart beta or low-cost investment is a different way to minimize risk. These are passively managed funds that attempt to replicate changes of a specific index in the stock market like the FTSE 100, or S&P 500 without the need for judgement.

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