Funds Explained Most people choose to invest in a ‘fund’ which means their money is pooled with other investors. What is a fund? A fund will typically invest in a portfolio of individual stocks and shares. the fund manager decides which asset types of investments will be held by the fund. There are four main types of asset classes ( Cash, Bond, Equity, Commodities) and it is highly important to understand which asset classes the fund you choose invests in. you also need to decide which type of fund management expertise you would like, either active or passive. Active Funds: Active funds, as the name suggest are ‘actively’ managed by a fund manager. they will buy and sell investments with the intention of maximising gains and losses. As the fund is actively managed, the fund managers can react to current markets situations and take advantage of insights and opportunities as they arise. active funds aim to outperform the benchmark they are measured against. Passive Funds: In contrast to active funds, a passive fund follows a different set of guidelines. Rather than trying to anticipate and identify growth opportunities, a passive fund will aim to mirror the performance of a perticular stock market index, such as the Standard & Poor’s 500. So why choose to invest in a fund? There are numerous advantages to investing in funds compared to individual assets or investments; The fund manager picks investments for you. There is less administration as the fund manager does it all for you. it costs less than buying investments individually. You have more choice and, as part of a group of investors, you will get access to a wider range of investment opportunities.
