Investments and funds
Investment funds are investment instruments that pool the funds of investors and then invest it in a portfolio of stocks, bonds, or other assets. Each fund is managed by a person who decides on the type of assets to purchase or sell, and charges an administrative fee to manage the fund. There are many different types 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 reasons behind your decision and the length of time you’d like to invest for, and your investor profile that reflects your level of level of risk-taking. Younger investors, for example may have more time to invest and be more comfortable with a higher risk level in order to achieve the highest growth in the long run.
Diversification is a great way to reduce your risk, like saving. This means spreading your investments across various asset classes that have lower correlations between their price movements so that a decrease in value of a class can be offset by a gain in another.
Another way to limit risk is to use smart beta or low-cost investments. These are passively managed fund which aims 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.