What is investment funds?
Investment funds are a collection of collective investments that enable investors to invest indirectly in the stock of companies or other types of investments.
This is a collective investment due to the fact that investor money is collected with other investors and invested in their behalf by an expert fund manager.
There are many types that can be used to accumulate wealth. Each offers different risks and benefits and success depends on the overall objectives of investors.
Some examples of investment funds are;
Equity funds
Cash Funds
Bond funds
Currency funds
Funds like this have the potential to eliminate a lot of complexity involved in making investment decisions, and therefore they can be options that are liked by new investors and those who are not confident to invest directly.
How do they work?
Aggregate Investment Funds Funds for a large number of small investors become specific investments that enable investment companies to access the wider range of securities. Individual investors are not blocked by high trading costs because companies can obtain an economic scale in operation.
Most individuals choose a combination of funds to make a diverse portfolio to reduce risk. Differences in the type of fund can mean that a more courageous investor wants to invest in equity funds and receive a higher level of risk for greater potential returns. However, more careful investors can choose funds that are considered to have a lower level of risk such as some bonds and cash.
Most of the funds have a minimum lump sum investment of £ 1000 and investors can also invest in a monthly savings plan starting £ 50 per month per month.
Unlike tax-saving isa, if money is placed directly into funds, all profits made can be subject to capital gain tax if sold or transferred. However, every year an investor has the right to tax-free allowances, currently £ 11,280 for the 2012/13 tax year, so if funding activities produce an increase in this number, investors may not have to pay any capital to get taxes.
What are the benefits?
A wide selection of available funds offers investors of various benefits;
• Investment funds have various levels of risk that increases the available options for investors
• Funds include all major geographical areas around the world that allow investors to exploit different markets
• Funds offer opportunities for growth or regular income making – or a combination of both
• Funds with different investment goals allow investors to choose funds that match their own investment goals
• Expert fund managers work to provide funds on behalf of investors
• Tax advantages with certain investments
Main feature
Investment funds are a form of collective investment
There are various types of investment funds that are in accordance with different investment goals
Investment funds offer a simpler way to invest money
The expert fund manager takes control of running everyday funds
Please remember, the feasibility of investing in ISA or similar will depend on the state of your individual, and all tax rules can change in the future.
