Investments and funds
An investment fund is an collective investment vehicle that pools the cash of investors to invest in an investment portfolio consisting of bonds, shares, or other assets. Each fund has a manager that makes decisions about what to purchase and sell, and charges a fee for managing the fund. There are various types of investment funds, such as unit trusts (UCITS), OEICs, and open ended investment companies (OEIGCs).
When investing in funds, it is important to take into consideration the reasons you are doing it and your investment profile that shows your risk tolerance and the length of time you intend to invest. Younger investors, for example might have more time to invest and be more willing to take on a higher risk level to ensure that they can grow over the long run.
In terms of saving, one of the best methods to reduce risk is through diversification. Diversification refers to spreading your money over different types of assets with less correlation a knockout post in their price fluctuations. This allows you to reduce the value loss in one asset class by an increase in another asset class.
Smart beta, also known as low-cost investment is another way to reduce risk. These are funds that are managed by passively which attempt to replicate the movements of a specific index in the stock market like the FTSE 100, or S&P 500 without the need to make a judgement.