Mutual Funds
Mutual funds are pooled investments that bring together money from a number of investors. The fund in invested in a portfolio of assets, such as shares, bonds or other investments, in line with its stated investment objective and strategy.
Funds are managed by professional investment managers and may be actively managed, where investment decisions are made by a fund manager, or passively managed to track a particular market index.
Different funds have different investment objectives, strategies and levels of risk. Before investing, it is important to understand what a fund invests in, the risks involved and any fees and charges that apply.
Understanding Mutual Fund Risk
The risks associated with a fund will depend on what it invests in. these may include market risk, credit risk, liquidity risk and currency risk.
Some funds may also use derivatives, which can introduce additional risks. You should read the relevant fund documentation before investing to understand its objectives, risks, costs and charges.
Investment Risk
The value of investments can fall as well as rise and you may get back less than you originally invested. Past performance is not a reliable indicator of future performance. All investments involve risk, and you should ensure you understand the risks associated with an investment before making a decision.
Key Features of Mutual Funds
Diversification
Funds may invest across a range of investments, which can help spread risk. The level of diversification will depend on the fund’s strategy.
Professional Management
Fund managers invest and manage the portfolio in line with the fund’s stated investment objective and strategy.
Pooled Investment
Money from a number of investors is pooled and invested in a portfolio in line with the fund’s investment strategy.
Buying and Selling Fund Units
Fund units or shares can generally be bought or sold in accordance with the fund’s dealing arrangements. The frequency and terms vary between funds.
Investment Choice
Funds can provide access to different asset classes, markets, sectors and investment approaches.
Different Fund Objectives
Funds may be designed to pursue different objectives, such as capital growth, income or a combination of both.
