It is a great way to grow your funds and meet your long-term financial goals. It can also be done in conjunction with the assistance of professional advisors, who can help you balance the need for principal protection and some potential growth against your financial circumstances and comfort with the risk.
With investment funds, your and other investors’ savings are pooled together. A fund manager then buys, holds and sells investments on your behalf. Most funds consist of a mixture of assets which reduces the risk of investing. Some funds are more specialised like ones that focus on commodities or property. There are also multi-asset funds that may hold a mixture of different asset types, including bonds and shares.
Certain funds are geared toward particular regions or segments such as emerging markets or green investment. Some also have a variety of specific investment objectives for instance, aiming at specific growth rates or reducing risk that is unsystematic. Others have a more general goal, like low-cost investing.
The type of unit trusts, OEICs and investment trusts you pick will depend on the length of your investment period and your risk tolerance. Younger investors might be more willing to accept a higher level of risk, and consequently, choose funds that contain a higher percentage of stocks. Alternatively, those who are nearing retirement or have family obligations might prefer an easier risk and choose a fund that has more bonds.