Investment and Funds

Funds and investments

An investment fund is an collective investment vehicle that pools the money of investors to invest in an investment portfolio that includes shares, bonds or other assets. Each fund has a manager that makes decisions about what to buy and sell, and also charges fees for managing the fund. There are a variety of investment funds. These include unit trusts (UCITS), OEICs and open ended investment companies (OEIGCs).

When you invest in funds, it is essential to consider the motives behind it, how long you want to invest and your investor profile that reflects your level of tolerance for risk. For example, younger investors might have more time on their side and are more comfortable with a higher level of risk in order to maximise growth over the longer term.

With regards to saving one of the best ways to reduce risk is through diversification. Diversification is the process of spreading your money over different asset classes with lower correlations in their price movements. This lets you reduce the value loss in one class of asset by an increase in another asset class.

Another way to mitigate risk is through using’smart beta’ or low-cost investments. They are a type of passively managed fund that try to replicate the movements of a specific index of the market, like the FTSE 100 or S&P 500, without the need for human judgement.