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93-95 Gloucester Place,

London W1U 6JQ, United Kingdom.

Unit 4 Arlington Court,

Business Park, Stevenage SG1 2FS

investment funds

A Guide to collective investment funds

Oracle’s guide to Collective Investment Funds:

One of the most common and effective ways to diversify your investment portfolio is by putting your money into a Collective Investment Fund.

Collective Investment Funds allow you to get returns on your money without the masses of experience and time it would take to effectively manage investments alone.

What is a Collective Investment Fund?

Collective investment funds make it possible to reduce the risks associated with investing by putting your money into a shared fund.

You can take part in a collective investment fund by putting your capital into Open-Ended Investment Companies (OEICs) or Unit Trusts.

Both types of collective investment funds have fund managers who make the investment decisions, making them ideal for those who don’t have the time or experience necessary to invest effectively.

What are you actually investing in?

Unit trusts and OEICs make it easy to diversify your investment portfolio because they invest in multiple sectors, countries, and asset classes, thus spreading the risks.

OEICs, Unit Trusts, and Ownership

Investing in OEICs means buying shares in the company, whereas when you buy units in unit shares, you do not actually own any individual company assets. OEICs are governed by company law and unit trusts are governed by trust law.

Differences in flexibility between OEIC and Unit Trusts

Open-ended investment companies give investors more flexibility than unit trusts, giving you more choices in investment strategies, commissions, and charges.

How do you get hold of your returns?

Depending on how liquid the assets are that the collective investment fund has invested in, it is usually quite easy to sell your units or shares and get hold of your returns.

When your collective investment fund has invested in things such as property, which are harder to sell, you will usually have less choice as to when you can sell – in these cases there will be specific periods during each year when you are allowed to sell your units or shares.

What does a fund manager do?

When you put your money into a collective investment fund, a fund manager will make all the investment decisions.

While most collective investment funds are actively managed, where the fund manager will put research into various investments, others are managed more passively.

With the latter option, the fund manager will not make any big investment decisions, but will instead keep track of how the market is increasing or decreasing the value of the investments in the collective investment fund.

While it might at first seem obvious that a more actively managed collective investment fund is the better option, it all depends on whether you trust the markets over any choices the fund manager makes and your attitude to risk.

How much does it cost to be part of a Collective Investment Fund?

When putting your money into a collective investment fund, OEICs and unit trusts are usually very open and clear about the fees they charge – you should be told before investing any money.

You will usually need to invest at least £1000 and be charged a small percentage (0.5-1.5%) each year. Occasionally a collective investment fund will ask for an up-front fee too.

How to choose the right collective investment fund

There is a lot of choice when it comes to collective investment funds, especially since they are split into open-ended investment companies and unit trusts.

If you need advice on choosing the right collective investment fund for your situation, your goals, and your attitude to risk, get in touch with Oracle.

The value of your investment can fall as well as rise.