Investment funds

Considering putting your money into an investment fund may provide an alternative to investing directly in shares and other types of investment such as property. An investment fund pools investors' money together to buy a mix of assets as selected by the fund's manager. You can choose which funds best suit your needs based on the fund aims and risk rating.

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.

You can invest directly in investment funds such as unit trusts and Open-Ended Investment Companies (OEICs), through a Stocks and Shares ISA, or investment bonds offered by many life companies.

Please remember that the value of investments can go down as well as up and so there is always a risk that you may not get back the amount you put in.

• Unit trusts and OEICs

Fund managers pool money together from many investors to purchase shares, bonds, property or cash assets and other investments.

When you invest in a fund, you are also investing in the fund manager's opinion, research and expertise.

• ISAs (Individual Savings Account)

A wrapper that surrounds your money to help shield it from tax.  Each tax year you will receive a new ISA allowance which can be held in cash or stocks & shares, or a combination of both in any way you wish.  Investment funds can only be held in a Stocks and Shares ISA and not within a Cash ISA.

• Investment bonds

These are products which invest your money with the aim of providing you with medium to long-term returns.  They can be a good way of allowing you to invest in a mixture of investment funds that are managed by professional investment managers. 

 

Taxation and funds

You might have to pay tax on any gains and/or income you may receive when investing in funds.  Any tax liability will depend on how you invest, your individual circumstances and the tax situation at the time.

Charges

Investing in funds may also carry annual and/or ongoing charges so it's always worth researching such investments thoroughly before committing your hard-earned cash.

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* Index. The value of a tracker fund will usually reflect the fortunes of the index it tracks so, for example, if the stock market rises then the value of your fund should also go up. Similarly, if the stock market falls, so too will the value of your fund.  Other types of funds include balanced managed funds, which spread their riskacross 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. An equity fund typically invests in growing companies (hence the term: "equity").

Each different type of fund can carry a different level of risk depending on what type of assets they are invested in and there is always the risk that you may not get back the amount you originally put in.

We are not recommending one option over another or providing advice.

*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.

Need help? Have questions?

If you're looking for further information or want to chat about your product options, we can help.

Contact us