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?

Popular Funds

Fund Name Ongoing Charge (OCF) 1 Year Return* 5 Year Return* Factsheet
Fundsmith Equity 0.95% 13.46% 141.16% Fair Investment
Baillie Gifford American (Class B) 0.51% 107.36% 517.07% Fair Investment
Baillie Gifford Positive Change (Class B) 0.53% 74.04% N/A Fair Investment
Baillie Gifford China (Class B) 0.76% 75.62% N/A Fair Investment
Baillie Gifford Global Discovery (Class B) 0.76% 78.47% 331.39% Fair Investment
Baillie Gifford Pacific (Class B) 0.71% 79.46% 282.52% Fair Investment
Vanguard Life Strategy 80% Equity A 0.22% 5.83% 73.68 Fair Investment
Vanguard LifeStrategy 60% Equity A 0.22% 4.93% 58.24% Fair Investment
Premier Miton UK Smaller Companies 0.91% 110.95% 127.79% Fair Investment
Baillie Gifford Long Term Global Growth 0.65% 87.63% N/A Fair Investment

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.

An online investment platform is simply an online account where you can access your investments including, shares, ISAs, investment funds in one place.

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.

Benefits include:

  • 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.

Important Risk Information: This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future. Different types of investment carry different levels of risk and may not be suitable for all investors. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice. * Details of how the Financial Services Compensation Scheme applies to investment firms can be found at fscs.org.uk.