What is a fund?

If you are investing in, or considering investing in a stocks and shares ISA – you may have come across the term – funds. Here we try and explain a bit about what funds are and how they work.

Fund Facts

  • A fund is a way of investing that pools together the money from a number of individuals. Fund managers then use the money to invest in number of holdings – this can be a made up of or be a mixture of shares in companies, currency, property and bonds.

  • Every investor in the fund is issued with a number of units which represent a portion of holdings in the fund. The value of the fund is calculated daily and the value of the units will fluctuate in line with the performances of holdings within the fund.

  • Different funds have exposure to different types of industry – for example Technology, Pharmaceuticals or different parts of the world, e.g. UK, Europe, America etc.

  • When you invest in a fund you will pay a fee to the fund manager – this is reflected in the daily price of the fund. When investing with Financial Discounts Direct you will pay a small annual fee to us and to Aegon (for use of their fund platform) which is taken on a monthly basis.

A popular choice

Funds are popular with investors as it allows their money to be invested in a variety of different companies, which reduces risk compared to investing in individual shares. Furthermore, the manager who runs the fund is an expert and takes responsibility for ensuring the fund is balanced and for tracking the performance of each holding – a time consuming job. 

Funds, funds and more funds

As an investor in the UK there are over 3,000 funds you can invest in, which is lots of choice. To try and make the selection process easier for you we have some resources on hand – our Fund Hub section of the website has filtering tools, allowing you to whittle down the list on various criteria.

Our First Class Funds publication is produced twice a year. The list is created using the opinions of specialist agencies, whose job it is to dig deeper into a fund’s structure and process to identify areas of strength or weakness. We combine this with statistical data of the funds recent performance to produce a list of dozens, rather than thousands, of funds.

This article is for information only and reflects the author’s views at the time of writing, which are subject to change. This should not be regarded as a recommendation or solicitation to invest. If you are in any doubt about the suitability of an investment for your needs, you should seek professional advice.