Investing In Funds
Funds are investments that pool money from lots of investors. Money is invested in a wide range of assets e.g. UK and international shares, government and corporate bonds etc Different funds will have different investment strategies and objectives.
Investment funds offer individual investors a broader selection of opportunities and access to management expertise as well as lower fees than could be achieved if an investor went alone.
What are the advantages of investment funds?
If you would rather let someone manage your money for you then you can benefit from:
- Diversification of risk – funds typically have holdings between 20 up to 100 or so investments.
- Management expertise – Typically there will be at least one fund manager who will be responsible for the running of the fund and using their expertise to maximise opportunities.
- Investing as little as £25 per month
- Cost efficencies – through pooled investment means that the normal buying and selling costs of investments can be shared across a larger range of people
What investment funds are people buying?
|Fund Name||Ongoing Charge (OCF)||1 Year Return*||5 Year Return*||Factsheet|
|Baillie Gifford American (Class B)||0.51%||107.36%||517.07%|
|Baillie Gifford Positive Change (Class B)||0.53%||74.04%||N/A|
|Baillie Gifford China (Class B)||0.76%||75.62%||N/A|
|Baillie Gifford Global Discovery (Class B)||0.76%||78.47%||331.39%|
|Baillie Gifford Pacific (Class B)||0.71%||79.46%||282.52%|
|Vanguard Life Strategy 80% Equity A||0.22%||5.83%||73.68|
|Vanguard LifeStrategy 60% Equity A||0.22%||4.93%||58.24%|
|Premier Miton UK Smaller Companies||0.91%||110.95%||127.79%|
|Baillie Gifford Long Term Global Growth||0.65%||87.63%||N/A|
Most purchased funds on investment platform Interactive Investor in January 2021. Fund data as at 22/2/2021.
What types of investment fund are there?
There are 3 types of investment fund:
Open ended funds – Often called OEICs or Unit Trusts in the UK or mutual funds in the USA. As the term suggests the fund is open ended, so as more investors invest, the fund gets bigger and vice versa.
Closed ended funds – Or commonly known as investment trusts. With an investment trust there is a fixed number of shares. When you buy shares, you are buying those shares from other investors via the stock market.
Exchange traded funds – Known as ETFs, similar to investment trusts as their shares are traded on a stock exchange, and typically track an index such as the FTSE 100 or S&P 500. ETFs are low cost and are becoming increasingly attractive with investors for that reason.
How do I invest?
You may have decided on the fund or funds you wish to invest in.
The next step is to choose a fund platform – the advantage of a platform is that it gives you flexibility in managing your investments which you don’t get if you invest directly with one fund manager.
The point is to make your life easier!
You can buy funds simply online usually at a discount and as well as a direct account, you also have the option with all good platforms to hold the fund in a tax free wrapper such as an ISA or a SIPP.
- Easy access to the stockmarket
- Many platforms provide ready made portfolios/funds to help you choose
- Keep your ISAs, Junior ISAs and pensions (SIPPs) in one place
Most platforms will also provide useful research tools and ways of assessing performance of investment funds you are considering.