Investment and funds
Investment funds are collective investment instruments that pool the funds of investors and invest it into a portfolio consisting of bonds, stocks, or other assets. Each fund is managed by a fund manager who decides what to purchase and sell and charges a management fee. There are many kinds of investment fund, including unit trusts (UCITS), OEICs, and open ended investment companies (OEIGCs).
When investing in funds, it is essential to consider the reasons you are doing it as well as your investment profile, which will reflect your risk tolerance, and the length of time you intend to invest. For instance, younger investors might have more time and are more comfortable with a higher level of risk in order to maximize growth over the longer term.
With regards to saving one of the most effective methods to lower risk is through diversification. Diversification involves spreading your money across various types of assets with less correlation in their price movements. This allows you to counter the loss in one asset class with the gain of another asset class.
Low-cost or smart beta investment is another method to lower risk. These are passively managed funds which attempt to replicate the changes of a specific index in the stock market like the FTSE 100, or S&P 500 without the need to make a judgement.