We look at the reasons why you might invest in funds.
Watch our video to find out why you might invest in funds over investing directly in stocks or shares in a well-known company.
When you’re thinking about investing, the first thing that might come to mind is buying shares in a large, well-known company or business you’ve heard of.
Its size and reputation can seem reassuring, but what many don’t realise is that this can be quite a high risk strategy as your investment is reliant on how profitable that single company is.
The value of your shares could plummet overnight, for example, if:
Invest in a number of companies
You could consider diversifying. This would mean spreading your money across a number of different companies’ shares, which could potentially help to reduce the amount of risk you’re taking overall, though this could prove costly if you pay a fee for each transaction.
Invest in funds
When investing in funds you pay an annual fee for a professional fund manager to invest your money in a range of investments. The benefit of this is that your investment will be more diversified across a range of different companies, industry sectors, regions, or types of asset. Depending on the fund you choose, it could give you access to shares in a range of industry sectors such as technology, healthcare and energy, as well as markets across the world. This can help spread your risk so that potential losses in one area may be offset by potential gains in another although there are no guarantees.
Investing in funds therefore lets you create a portfolio that suits your investment needs and your ability to cope with any losses.
Please remember that the value of investments can go down as well as up and you could get back less than you invest. You should consider investing for 5 years or more.
We can help you make your own investment decisions:
Before investing you need to decide the amount of risk you're willing to take with your money and your capacity to deal with any losses.
By using the ISA calculator you will get an indication of how much a Stocks and Shares ISA might be worth in the future.