Investment and Funds

Posted by Security Vault

Investment 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 fund manager who decides on what to purchase and sell and also charges a management fee. There are a variety of investment funds, such as unit trusts (UCITS), OEICs and open ended investment companies (OEIGCs).

When you invest in funds, it is important to consider the motives behind doing it and your investment profile that shows your risk tolerance and the time frame you plan to invest. For example, younger investors may have more time and feel more comfortable with a higher amount of risk in order to maximize growth over the long term.

Diversification can be a great way to reduce risk, like saving. This means spreading your investment across various asset classes that have less correlation between their price movements, so that the fall in value of one class can be offset by gains in a different one.

Another way to mitigate risk is to use smart beta or low-cost investment. These are funds that are managed passively that attempt to replicate movements of a specific index of the market such as the FTSE 100, or S&P 500 without the need for judgment.