Investment and Funds

Investments and funds

An investment fund is an collective investment vehicle that pools the cash of investors to invest in a portfolio of shares, bonds or other assets. Each fund is managed by a person who decides the type of assets to purchase or sell, and also charges a fee for managing the fund. There are many kinds of investment funds, including unit trusts (UCITS), OEICs, and open ended investment companies (OEIGCs).

When investing in funds it is essential to consider the reasons behind why you are investing and also your investment profile, which will reflect your risk tolerance, and the length of time you intend to invest. Younger investors, for instance, may have more time to invest and be more comfortable taking on a higher risk level to maximize growth over the long term.

When it comes to saving one of the most effective ways to reduce risk is through diversification. Diversification is the process of spreading your money over different asset classes with lower correlations in their price movements. This lets you counter the loss in one asset class with an increase in another asset class.

Another way to mitigate risk is to use smart beta’ or low-cost investments. These are a type of fund that is managed passively and tries to replicate the movements of a particular stock market index, like the FTSE 100 or S&P 500, without the need for human judgment.

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