Investment funds are professionally managed pools of capital from multiple investors, with the goal of generating returns by investing in a variety of assets. These funds offer a convenient way for individuals to invest in the financial markets, without having to actively manage their own portfolios.

There are several types of investment funds, including equity funds, bond funds, and balanced funds. Equity funds invest primarily in stocks, while bond funds invest in fixed income securities such as bonds. Balanced funds, as the name suggests, invest in a combination of stocks and bonds.

Investing in investment funds can provide exposure to a diverse range of assets and help to reduce risk, compared to investing in individual stocks or bonds. Additionally, investment funds are managed by professional fund managers, who have the expertise and resources to make informed investment decisions.

If you are considering investing in investment funds, it is important to consider your investment goals, risk tolerance, and investment timeline. Our team at Patrick Wayne Wealth can help you determine the best investment strategy for your individual needs and provide guidance on selecting the right investment funds for you. Investing in investment funds involves risk, including the loss of your capital. Before making any investment decisions, it is important to consider your own financial situation and seek advice from a financial advisor if necessary.

Actively Managed vs Passively Managed Investment Funds

Actively managed funds are managed by a professional fund manager who selects and monitors individual investments within the fund. The aim is to deliver a return higher than a benchmark, such as the FTSE All-Share Index. However, actively managed funds come with higher fees due to the cost of the fund manager, and not all funds outperform their benchmark. Passively managed funds track an index, such as the FTSE 100, and have lower fees. However, a problem in a dominant sector can impact the entire fund, and a lack of a fund manager can limit the ability to react to market events.

Unit Trusts

Unit trusts are open-ended investment funds formed under a business trust deed. The fund is divided into units, the price of which is based on the fund’s net asset value. New units are created to meet demand, and the money collected from investors is invested in securities such as shares, bonds, and gilts by a fund manager.

Open-Ended Investment Companies (OEICs)

OEICs are similar to unit trusts but are set up as a company instead of a trust. The fund manager invests the money collected from investors in securities, and the price of the fund’s shares is based on its net asset value.

Exchange Traded Funds (ETFs)

ETFs are investment funds that are traded on a stock exchange like individual stocks. ETFs track an index, such as the FTSE 100, and the price of an ETF’s shares reflects the performance of the underlying index.

Investment Bonds

Investment bonds are fixed-term investments where an investor loans money to a company or government in exchange for interest payments. Investment bonds can offer a regular income but carry risks, such as default or credit rating changes.

Multi-Manager and Multi-Asset Investment Funds

Multi-manager investment funds have multiple fund managers, each responsible for a portion of the fund. Multi-asset investment funds invest in a mix of assets, such as stocks, bonds, and property, to diversify investments and reduce risk.

Fund Charges

Investment funds come with charges, such as annual management fees, performance fees, and charges for buying and selling units. It’s important to consider the total charges when choosing an investment fund.