Investments and funds

An investment fund is an collective investment vehicle that pools the funds of investors to invest in an investment portfolio that includes bonds, shares or other assets. Each fund is managed by a person who decides on the type of assets to purchase or sell, and is charged fees for managing the fund. There are various kinds of investment funds, such as unit trusts (UCITS), OEICs and open ended investments companies (OEIGCs).

When investing in funds, it is important to take into consideration the reasons why you are doing so and your investment profile that shows your risk tolerance and the length of time you intend to invest. For example, 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 longer term.

Diversification can be a great way to lower your risk, as is saving. This means spreading your investment across a variety of asset classes that have lower correlations between their price movements in order that a decline in value of one asset class can be offset by a gain in a different one.

Another way to minimize risk is to use smart beta or low-cost investments. They are a kind of passively managed fund which aims to replicate the movements of a particular stock market index, such as the FTSE 100 or S&P 500, without the need for human judgement.

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