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Investment funds explained

Investment funds, mutual funds, ETFs, investment trusts. Here we provide an introduction to investment funds for beginners, and show you the best funds to invest in to start your portfolio

  • Three types of funds

    There are three types of funds: funds (also known as Mutual Funds, Unit Trusts and Open-Ended Investment Companies), Exchange Traded Funds (ETFs) and Investment Trusts

  • A basket of shares

    Rather than buying shares in individual companies, funds give you access to a broad group of assets in a single investment

  • A range of categories

    Funds can have a specific focus, such as a country, a region or an emerging market, and can specialise in different asset classes including equities, fixed income, property or sectors such as precious metals or infrastructure

What is an investment fund?

An investment fund pools money from lots of investors and is used to buy a range of assets – giving investors an instant stake in a number of holdings and the benefit of expertise within the fund.

Funds are popular as these ready-made baskets of securities are a great way to invest a diversified portfolio, with low ongoing fees, ease of trading and flexibility all adding to their appeal.

Whether funds (also known as Mutual Funds, Unit Trusts and Open-Ended Investment Companies), Exchange Traded Funds (both physical and synthetic) or Investment Trusts, they give you access to a group of financial assets without having to buy them individually.

Funds are a simple way to invest in a range of leading companies where managers decide which companies to invest in, when to invest and how much of a fund’s money to commit to a particular company.

But you’ll need to be in it for the long-term, at least five years. That way you have a better chance of riding out any short-term market volatility and enjoying greater returns.





Investment Risk Warnings

The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance.

EQi does not provide investment advice. If you are in any doubt as to the risk or suitability of an investment or product you should seek advice from an independent financial adviser.

The extent and value of any ISA tax advantages or benefits will vary according to the individual's circumstances. The levels and bases of taxation may also change.v

Why do investors choose funds?

  • Reason 1


    Funds are a simple way of accessing investments from leading companies around the world.

    As you’ll have a share of several different asset classes, it is considered lower risk than buying shares in one or two companies as any change to one share can be offset by the performance of the others.

  • Reason 2


    Because teams of professionals spend their time researching thousands of investments, you’ll typically pay more for an actively managed fund, but there’s potential for much higher returns.

    It also means someone is tactically managing your investments, so when a region looks like it might be on the up, or a sector starts to suffer, the fund manager can decide to move your money around to expose you to growth or protect you from any losses.

  • Reason 3


    You get to decide which funds to buy into based on your attitude to risk and how long you plan to invest for. With EQi, you can access three independently-researched fund selections:

    • Funds to get you started
    • Funds to build up your portfolio
    • Funds for seasoned investors

Our fund list, independently rated by Square Mile

  • Why EQi?

    Funds to get you started

    How do you know where to start when there are so many funds to choose from? Start with just three, aligned to your appetite for risk.

  • Why EQi?

    Funds to build up your portfolio

    As you build your confidence over time and know what to look for, it helps to have more choice. See our top fund picks aligned to your investing goals and your appetite for risk.

  • EQi explains

    Who are Square Mile?

    Our partner, Square Mile, is one of the most respected investment fund research firms in the UK

  • EQi explains

    How to read fund factsheets

    We break down the jargon and answer some common questions

  • EQi explains

    How do Square Mile select funds?

    Find out more about how Square Mile selects funds

  • EQi explains

    ESG ratings

    What do 'Enviromental, social and governance' fund ratings mean in practice?

Common questions about funds

  • What do fund managers do?

  • How do funds differ from stocks and shares?

  • What do funds invest in?

  • What are Exchange Traded Funds (ETFs)?

  • What are investment trusts?

  • What's the difference between open-end and closed-end funds?

  • What's the difference between active and passive funds?



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