Investment and Funds

Funds and investment

An investment fund is an collective investment vehicle that pools the funds of investors to invest in an investment portfolio that includes shares, bonds or other assets. Each fund is managed by a person who decides the type of assets to purchase or sell, and also charges an administration fee for the fund. There are many types of investment funds, including unit trusts (UCITS), OEICs and open ended investments companies (OEIGCs).

When investing in funds it is essential to consider the motivation behind why you are doing this and how long you’d like to invest and also your profile as an investor, which reflects your willingness to take risks. Younger investors, for example, may have more time to invest and be more comfortable taking on a higher risk level to maximize growth over the long run.

In terms of saving one of the most effective methods to reduce risk is through diversification. This means spreading your investments across different asset classes that have less correlation between their price fluctuations to ensure that any decline in value of one class can be offset by a gain in a different one.

Another way to minimize risk is by using smart beta’ or low-cost investments. These are passively managed funds that attempt to replicate the movements of a specific index of the market, such as the FTSE 100 or S&P 500, without the need for human judgement.

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