Funds are ‘pools’ of money from many different investors that are used to buy a range of company shares, bonds and other assets. By pooling money with other investors you can take advantage of investment opportunities more easily than if you bought the individual assets yourself. The pool of funds is managed by (surprise surprise) a Fund Manager and they will use their knowledge, experience and research to grow the collective pool of funds by buying and selling investments when the time is right.
Investing in a fund is different from investing directly in shares or bonds. Each fund takes a balanced approach and invests in a range of assets. That means they’re typically lower risk than going down the root of choosing and investing in individual companies yourself. But handing over your hard-earned cash to a fund manager doesn’t mean you don’t have decisions to make. In fact, the main decision you’ll have to take is which fund to go with in the first place. Funds can be focused on specific industry sectors, geographic locations and even asset types (for example – property).
Funds also have their own clear objectives such as:
• to deliver growth by investing in UK companies and emerging markets
• to generate income by investing in UK government bonds
• to deliver growth and income by investing in companies that pay high dividends
And that’s not all – here’s some other points to consider before making your fund choice.
Age of the fund
Do you want a fund with an established track record or would you rather get in early with a new fund launch? It’s worth remembering that past performance is not a guide to what might happen in the future.
It’s worth remembering that past performance is not a guide to what might happen in the future.
Size of fund
This indicates the fund’s popularity and past success at attracting investors. However, some funds can be so large it’s difficult for the fund manager to run it and that means it might be a less attractive investment. A small fund is sometimes easier to manage.
Fund manager tenure
Consistent fund performance often relies on a fund manager having managed it for some time. But watch out – star performers can change jobs.
Companies such as Morningstar, Standard & Poor’s and Moody’s provide independent ratings for funds’ performance, creditworthiness and consistency of management and are a great place to research specific funds once you’ve narrowed down your search.
Look closely at all the fund charges and the penalties for withdrawing your money. Tiny differences in the percentage charged for fund management could cost you thousands, if not tens of thousands of pounds in the long run.
It takes time, experience, knowledge and skill to work out which fund could be right for you and the best place to find that is by speaking to a Financial Adviser. Here at Credius we’ve got the experience and professionalism to help you make the most suitable investment choices so why not call us today on 020 7562 5858 or email us at email@example.com. We’d love to hear from you.