Investment and Funds

Investment and funds

Investment funds are collective investment instruments that pool the funds of investors and then invest it in an investment portfolio made up of bonds, stocks or other assets. Each fund has a fund manager who makes decisions about what to buy and sell and also charges a more management fee. There are various types of investment funds, such as unit trusts (UCITS), OEICs, and open ended investment companies (OEIGCs).

When you invest in funds, it is crucial to think about the reasons you are investing, your investment profile which is a reflection of your risk tolerance and how long you plan to invest. Younger investors, for instance could have more time and are more willing to take on a higher risk level to maximize growth in the long run.

As with saving, one of the best ways to reduce risk is to diversify. This means spreading your investment across several asset classes that have less correlation between their price fluctuations so that a decrease in value of one asset class can be offset by gains in another.

Another way to minimize risk is by using smart beta' or low-cost investments. These are funds managed in a passive manner which attempt to replicate the movements of a specific index of the market such as the FTSE 100, or S&P 500 without the need for judgment.

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