Funds and investments
An investment fund is an collective investment vehicle that pools the cash of investors to invest in an investment portfolio consisting of bonds, shares or other assets. Each fund has a fund manager who decides on what to purchase and sell and charges a management fee. There are many different types of investment funds. They include unit trusts (UCITS), OEICs and open ended investment companies (OEIGCs).
When investing in funds, it’s important to consider the motives behind it, how long you want to invest and also your profile as an investor, which reflects your best site tolerance to risk. For instance, investors who are younger may have more time on their side and feel more at ease with a higher degree of risk to increase their growth in the long run.
As with saving one of the best ways to reduce risk is to diversify. This means spreading your investments across various asset classes that have less correlation between their price fluctuations in order that a decline in value of one class can be offset by gains in another.
Another way to limit risk is by using smart beta or low-cost investments. These are passively managed funds that attempt to replicate the performance of a particular index of the stock market, like the FTSE 100 or S&P 500, without the need for human judgement.