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Investment and Funds
Investment and funds
Investment funds are collective investment instruments that pool the funds of investors and then invest it in a portfolio of bonds, stocks or other assets. Each fund has a manager that makes decisions about which assets to purchase and which to sell, and also charges an administration fee for the fund. There are various types of investment funds, including unit trusts (UCITS), OEICs, and open ended investment companies (OEIGCs).
When you invest in funds, it is important to take into consideration the motives behind doing so, your investment profile which reflects your risk tolerance, and how long you plan to invest. For example, younger investors might have more time and feel more comfortable with a higher level of risk to maximise growth over the long-term.
As with saving one of the most effective methods to lower risk is through diversification. This means spreading your investments across a variety of asset classes that have lower correlations between their price fluctuations to ensure that any decline in value of one asset class can be offset by a gain in another.
Another way to limit risk is by using smart beta or low-cost investments. These are funds that are managed passively that attempt to replicate the fluctuations of a particular index in the stock market like the FTSE 100, or S&P 500 without the need for judgment.
