One way to help reduce the risk (and costs) of investing directly in shares and other types of investment is to put money in a fund. A fund pools investors' money together and uses it to purchase a mix of investments selected by the fund's manager. You can then pick which funds best suit your needs based on the fund aims and risk, for example.
When you invest in a fund, you are also investing in the fund manager's opinion, research and expertise, as well as the strength of the fund he or she manages.
You can invest directly in funds such as Unit Trusts and Open Ended Investment Companies (OEICs) or through an ISA, or through investment bonds offered by many life companies.
Taxation and funds
You might have to pay tax on any gains or income you may make when investing in funds. Any tax liability will depend on how you invest. Read more about investment and taxation.
Types of fund
There are a number of different types of funds. Their names often tell you how they work, for example, a tracker fund aims to 'track' the performance of a named stock market index such as the FTSE 100*. Other popular funds include balanced managed funds, which spread their risk across a number of investment types, ethical funds, which aim to make socially responsible investments and funds with a specific geographical focus, such as UK equity funds.
*FTSE is a trademark jointly owned by the London Stock Exchange plc and The Financial Times Ltd and is used by FTSE International Limited ("FTSE") under licence. The FTSE 100 Index is calculated solely by FTSE. FTSE does not sponsor, endorse or promote the information on this page and is not in any way connected to it and does not accept liability in relation to its issue, operation and trading. All copyright in the index values and constituent list vests in FTSE.