What are funds and why invest in them?

Undraw guide what are funds

A fund is a collection of lots of different people’s money. The money is managed by a professional fund manager who invests it across a range of different assets, like shares, property or other assets depending on the fund.

There are many types of fund such as investment companies, unit trusts and exchange traded funds.

They make a profit by buying, holding and selling investments. When you invest in a fund your investment is spread across all the fund’s assets. It’s a simple way of expanding your portfolio and spreading your risk.

When you invest in a fund you become one of its investors. 

how a collective fund works

With a fund:

  • You gain access to a wider range of investments than you could normally buy yourself.
  • Your investment is managed by an expert fund manager.
  • Your money is spread across a number of different investments, giving you a diversified portfolio and spreading risk.
  • You gain economies of scale as the fund management and admin costs are spread amongst the investors in the fund.
  • You can invest small amounts often starting from £30 a month.
  • Depending on the fund you choose, you can invest in specific markets, industries or even small unlisted businesses which are at an early stage in their development.

Put all these benefits together and you find that collective investments are an effective and efficient way to invest in a diverse range of assets.