Different types of investment

Investment Types

Make the right investment choices with the best financial advice on pooled investments, investment trusts, multi-manager funds and more.

Pooled investments

These “pooled investments” or funds give you exposure to investing in world stock markets and can dramatically rise in value during boom periods. They are also less risky than investing directly in one or two shares, although it’s important to remember that values can fall just as easily.

There are several types of pooled investments but the most common are investment trusts and open-ended investment funds (also known as Oeics, pronounced Oiks) and sometimes called unit trusts, their old name.

Open-ended investment funds

Also known as collective investment schemes, these portfolios are run by fund management companies. They are referred to as “open ended” funds because the number of units increases and decreases in relation to the number of investors. Investors hope that the unit price will rise over time, as the price of the underlying investments increases, as well as benefiting from dividends.

Investment trusts

These are companies with shares and are closed ended, meaning there will only ever be a set number of shares available. You can either invest a lump sum by buying investment trust shares from a specialist provider or financial adviser, or invest on a regular monthly basis.

Multi-manager funds

For investors that want a diversified exposure to a variety of fund managers and regions of the world, multi-manager portfolios are worth a look. The idea behind these is that a multi-manager will buy funds run by a number of other managers with his or her choices reflecting the aims of the product. Charges can be higher than single funds, however.

Index tracker funds

Index trackers funds track or “mirror” the stock market they are invested in. The charges on such funds (where the management is termed “passive”) are lower than those levied if you were invested in an actively managed fund where the manager is paid to beat the market the fund is invested in.

Structured products

Structured products (also sometimes known as guaranteed products) have a fixed term, usually five or six years. The performance of the product is usually anchored to a particular equity market or sector. Depending on how the product is “structured”, the returns can be attractive, but investors need to check whether any “guarantee” of a return on investment might mean a risk to the original investment, or the capital.

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