Expanding and contracting in response to demand
Open-Ended Investment Companies (OEICs) are stock market–quoted collective investment schemes. Like investment trusts and unit trusts, they invest in a variety of assets to generate a return for investors. They share certain similarities with both investment trusts and unit trusts, but there are also key differences.
Open-ended investment funds are often called ‘collective investment schemes’ and are run by fund management companies.
Investing in one or more asset classes
Investing in funds provides a simple and effective method of diversification. Because your money is pooled together with that of other investors, each fund is large enough to diversify across hundreds and even thousands of individual companies and assets. A pooled (or collective) investment is a fund into which many people put their money, which is then invested in one or more asset classes by a fund manager.
A time-tested method for controlling risk over time
It’s natural to be looking for ways to smooth out your portfolio’s returns. Investing regularly can smooth out market highs and lows over time. In a fluctuating market, a strategy known as ‘pound-cost averaging’ can help smooth out the effect of market changes on the value of your investment, and is one way to achieve some peace of mind through this simple, time-tested method for controlling risk over time.
Remember your reasons for investing in the first place
Stock markets can be unpredictable. They move frequently – and sometimes sharply – in both directions. It is important to take a long-term view (typically ten years or more) and remember your reasons for investing in the first place.
How you choose to allocate your wealth between different asset classes will be one of the most important investment decisions you ever make. Asset allocation can account for the majority of your portfolio returns over the long term, so it’s essential that you achieve the right balance of cash, fixed income, equities and property in your portfolio.
Protecting your money from adverse market conditions
Today’s markets are as uncertain as ever. But there is one certainty – the future is coming. It may no longer be enough to simply preserve what you have today; you also have to build what you will need for tomorrow. When deciding whether to invest, it is important that any investment vehicle matches your feelings and preferences in relation to investment risk and return.
There are four main types of investments, known as ‘asset classes’. Each asset class has different characteristics and advantages and disadvantages for investors.
Allow your lifestyle to dictate your investment approach
To make the most of your investment opportunities, allow your lifestyle and not stock market fluctuations to dictate your investment approach. Your goals are what count, so keep them firmly in mind when you make financial decisions.
Sourcing a sustainable retirement income is essential, but you also have more options than ever before to help you find a solution. After you have made adequate provision for your essential needs, you may want to consider if you can afford to take any risk with some of your money to aim for better returns.