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Investment and Funds

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Investment and funds

Investment funds are investment vehicles that pool the money of investors and then invest it in an investment portfolio that is comprised of bonds, stocks or other assets. Each fund has a fund administrator who decides on which assets to purchase and sell and also charges a management fee. There are a variety of investment funds, including unit trusts (UCITS), OEICs and open ended investment companies (OEIGCs).

When investing in funds it is important to think about the motives behind it as well as the time frame you wish to invest for and your profile as an investor that defines your tolerance to risk. Younger investors, for example could have more time and are more comfortable with a higher risk to increase growth in the long run.

Diversification can be a great way to lower your risk, similar to saving. Diversification means spreading your money across various classes of assets that have lower correlations in their price movements. This lets you reduce the value loss in one class of asset by a gain in a different asset class.

Another way to mitigate risk is through using’smart beta’ or low-cost investments. They are a kind of passively managed funds that attempt to replicate the performance of a specific stock market index, such as the FTSE 100 or S&P 500 without the need for human judgement.

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