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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
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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
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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 a fund?
A fund is an umbrella term for an investment vehicle which pools together money from many investors, and where you benefit from expertise within the fund.
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.
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.
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.
Insights
Investment Trusts vs Funds
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Growth, income or preservation funds - which are right for you?
Letting income funds do all the work
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Insights22.02.18
Investment Trusts vs Funds
Insights15.08.19What is an OIEC?
Insights01.02.20Growth, income or preservation funds - which are right for you?
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Insights18.01.18
Letting income funds do all the work
Insights23.01.18What are the different types of ETFs?
insightsTop performing international funds
Common questions
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How do funds differ from stocks and shares?
Rather than buying shares in individual companies, funds give you access to a broad group of investments in a single investment.
By sharing your money around 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.
What do funds invest in?
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.
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What's the difference between open-end and closed-end funds?
Put simply, open-end means the fund can issue shares at any time, whereas closed-end means only a fixed number of shares are issued, usually at the outset.
What's the difference between active and passive funds?
Actively managed have fund managers in place working to out-perform the markets, while the passive approach tracks a stock market index such as the FTSE 100 in an attempt to replicate its performance.
It makes sense then that a passive fund will cost you less than an actively managed fund as typically there are lower levels of management and trading activity.
Our independently-rated fund lists
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List 1
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.
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List 2
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.